• dog behind bars

    Abandoned Animals: What Are Charities Doing To H...

    Tuesday, September 23, 2014

    A scared dog named “Theo” was rescued after a year of living on the streets of Los Angeles. The images of Theo, from the Mutt Scouts website, shows…

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  • comfort-women-5

    Women Victims of WWII Get Strong Support

    Saturday, September 6, 2014

    During the Second World War, tens or even hundreds of thousands of women in Asia were made as sex slaves by the Japanese soldiers. Not many people knew…

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  • myanmar_02

    Thirst Aid

    Wednesday, July 27, 2011

    The non-profit group has been running for quite sometime since the Tsunami’s of past and they have been filling the gap that left millions of people without clean…

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  • photo1052

    Children Generosity Without Prejudice (From the ...

    Tuesday, June 14, 2011

    Charity abounds and it is not limited by age as the charity event sponsored by Save the Children showed many people when they flocked to several locations to…

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  • world-oceans-day-620x351

    World Oceans Day

    Tuesday, June 7, 2011

    June 8 is designated to be the World Oceans Day and the event started in 2007 with over 50 countries spread over 5 continents participating. Various marine conservation…

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Mar
13

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Is Revenue-Based Financing for Nonprofit Organization Possible?

Charity Torn Paper

 

The biggest challenge that nonprofit organizations face is the ability to get their cause across people. In order to do this successfully, they need funds to implement their marketing campaigns, which is another problem they have to face.

Funds are a limited resource to these organizations that don’t intend of making money off their efforts. This is a reason why some charities requested protection from bankruptcy due to rising overhead and dwindling donations.

“When there is not enough money to cover all your bills, it is easy to feel overwhelmed,” according to bankruptcy lawyer Simon Resnik. “Financial distress can also make it difficult to concentrate at work, as well as cause you to avoid social situations.”

The idea of losing funds for your NPO or any organization can set up you up for the fall, especially if you’re not fully prepared for bankruptcy.

But this is just part of the bigger issue that drives NPO out of business, which is why they need to find other ways to build funds so they can execute their plans.

An idea is to institute a revenue-based funding for nonprofit organizations. What this does is investors back small businesses with a financial capital. Investors will get back their capital through regular gross revenue up until the fifth year. Aside from paying up the full amount, the business will also have to pay up a multiple or a cap.

Unlike other forms of loan, revenue-based funding does not get equity of the business, but instead takes a warrant instead.

While this appears to be an option that nonprofit organizations can take to pump life into their floundering finances, this is impossible and forbidden by law. Below are the reasons why..

Inurement

The inurement prohibition, also known as non-distribution constraint, prevents the organization to distribute the money it earns to individuals that has an interest in the organization. This includes employers, employees, and donors. While this law ensures that profit is not siphoned by insiders, it also puts investors at risk. As a result, revenue-based funding is impossible for this very reason. Investors won’t be able to get back their capital because the law forbids it. If an NPO is proven to have violated this law, they will lose their tax exemption.

Private benefit rule

The inurement prohibition is in line with the private benefit rule, in which nonprofit organization operate for qualifying exempt purposes (charities, causes, etc.). If an organization serves for the benefit of an individual or organization not part of the exempt purposes, then these transactions or transfer of funds are considered taxable. In relation to investors and donors, they will and should not get their supposed capital back according to this rule.

Unrelated business income rule

This type of income is defined as the amount received that go over the qualified asset account limit. Income received from unrelated parties such as investors should not be set aside as these are taxable.

Final thoughts: By crossing our revenue-based funding from your list of possible avenues to build finances, nonprofit organizations much look for money-making alternatives to sustain their cause. It is just a matter of being creative and coming up with a ingenious strategy to drive more donations that you don’t have to pay back.

More on nonprofit organization:

How to Register Your Nonprofit

Charity Foundations are Non-Profit Organizations

Feb
24

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How to Get More Donations for Your Fundraisers

fundraiser

When done correctly, fundraisers will raise money so your nonprofit organization can increase awareness to your cause and help make the situation better in any way you can.

The challenge now is to get more people to donate to your fundraisers. Since money is a limited resource for these organizations, they rely on donations and sponsorships. Both come from fundraising activities in line with the organization’s mission and objectives.

If your organization is having trouble in generating donations for your fundraisers, here are tips that you should follow to get the most out of your events. Read More

Feb
20

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What are the Duties of Charity Trustee?

Charities do a benevolent act of helping underprivileged communities and people around the world. Government support alone would not be sufficient to uplift the lives of poor people, combat diseases and preserve the environment where they are threatened without the assistance of these non-profit charitable organizations.

The role of private groups is always important where basic needs have to be met. In the U.S., more than 1.5 million nonprofit organizations are registered based on data from the National Center for Charitable Statistics (NCCS). These are public charities, private foundations, fraternal organizations, civic leagues and chambers of commerce among others.

charity-trustees-meeting

Who Makes Up a Charity?

A charity is made up of trustees or officers who make sure that the goals of the organization are met. These officers include the directors, board members, governors and committee members. Read More

Feb
14

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How Much Should You Really Give to Charity?

giving to charity

Sharing one’s blessings is an admirable trait that people must practice in their lives. One form of sharing is giving to charity.

It should be understood, however, that while giving to charitable organizations is a good act, not everyone is obliged to do it. Give only on your own free will like when you have something, money or otherwise, extra. It is understandable when you can’t give to charity when you are having financial difficulties.

Remember that the amount you decide to give depends on your personal circumstances. But when you decide to share, give as much you can because there are many underprivileged people who will greatly benefit from your donations maybe not in your own place but in other areas and countries. Read More

Dec
9

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Your Community Needs Your Help

The holidays give rise to a season of giving. It is normal for people to want to be part of that giving process. It can really make a person feel good to contribute in a way that helps others, much like a medical student who helps her first patient to get well.

giving back to community

Charity is often more than simply opening your wallet. Sometimes it means giving back to your local community in a more hands on way. Sure, anyone can write out a check and make helping others someone else’s problem, but the spirit of giving is not a spectator’s sport. Real charity comes from the heart, when a person is moved by compassion to lend a hand where it is most needed. If more people became active in charity work, then their community would be a more functional place for all its members. With a little thought, anyone can be part of the giving process. Read More

Dec
8

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Putting Excess Food And Clothing To Good Use

donating food

With the economy treating so many people roughly these days, there are a lot of families who could use a helping hand. Food, clothing, and other general use items are at the top of the list of things impoverished families tend to need. Also, by cleaning out your closet of unwanted wears, you will be making additional room for those designer furs you always wanted. As you take a look through your pantry, canned and boxed food items are generally the most useful items to donate. these items generally have a longer storage life than the food in your refrigerator. They are often the easiest for poor and homeless people to store — especially if a person does not have a refrigerator of their own. Although that is hard for some to imagine in our modern age, it is a situation that is more common than people might expect.

Giving to Churches and Food Banks

A lot of people would like to get involved, providing food items to the poor and needy, but are not sure where to begin. Generally, the poor and homeless obtain their food from shelters, food banks, and churches. In some cases, food that makes it into these centers is derived from the USDA surplus and other food redistribution projects. Though the redistribution of food from such sources is helpful, it generally does not satisfy the great need that exists. Most food pantries and food bank services still rely on other community members to donate to their cause, which helps to support the many efforts made to keep economically challenged people fed. If you have ever wondered how great the hunger problem in America truly is, according to the Feeding America website, approximately 49-million Americans struggle to obtain adequate food each day. Read More