Folly #32: Capital Grants
Think it's hard to finance a home?
This Folly still has me scratching my head.
The Story of a Nonprofit with Real Assets
I’ve worked with a nonprofit that owned the two buildings where they provide programs. They outgrew one and, when the market was hot, they sold it and put the money in the bank. For the past few years they’ve been looking for a replacement site that offered good access for clients and partners, and was large enough to meet their needs without too much renovation cost.
It’s pretty remarkable that an organization with a $2M annual operating budget owned – outright and debt-free – two parcels of real estate in a major metropolis. Because of their large amount of equity, this nonprofit anticipated that the funding needed to buy a new building would be around half a million dollars: less than 20% of the purchase price.
A Funder Who Says they Support Capital Projects
Imagine this nonprofit’s delight at finding one of the rare foundations that actually does support capital projects in their geographic area!
Most foundations list lots of things they will not fund, and that list almost always specifically excludes “capital projects” (such as buying a building).
This foundation also makes it clear that they do not want to be an early supporter of a capital project. Instead, they prefer to help close the funding gap near the end and make the project possible.
Perfect!
The funder’s board remained interested. Every time they met, they asked the nonprofit if they’d found a property to purchase. And each time when the answer was, not yet, this funder graciously and generously kept the request on the agenda for the next board meeting to revisit the status. There was no negative feedback on either the amount or nature of the request. It looked promising.
So here’s where it gets strange.
Requests for Information that Just Don’t Add Up
The nonprofit went into escrow for a building. Imagine their renewed delight at finally sharing this news with the funder! Soon they hoped to be buying the property, and would need the requested grant to fund part of the funding gap between what they had saved and the purchase price.
In response, this is what the foundation told them:
“The board decided that they would not be able to approve a request where the building was still going through escrow and inspections.”
And they postponed their decision to the next board meeting, which will likely be after the close of escrow.
Not Such a Capital Idea
The National Center for Family Philanthropy has this to say about capital grants:
An ideal capital grant helps an organization that is already strong. Capital projects, when done right, can be transformational, changing the arc of the nonprofit organizations that they support.
If a capital idea is an idiom meaning Great thinking! Wonderful idea! Brilliant thought! then what would you call this?
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