The nonprofit Bronx Defenders encountered an unwelcome surprise with their longtime commercial bank this spring: the bank would not be renewing its line of credit in the coming fiscal year. The bank’s credit officers had grown alarmed about persistently delayed payments on New York City government contracts and declared that it was pulling back on making loans that financed these contract payments.
Like any business, nonprofits like The Bronx Defenders depend on access to financing to even out cash flow, ensuring that lumpy cash payments from contract receivables don’t delay services for clients, jeopardize paychecks to staff, or threaten operational necessities like (literally) keeping the lights on. Lines of credit and other bridge financing mechanisms have become even more critical for nonprofits in recent years as payments on city social service contracts have become even more chronically delayed.
The issue was highlighted in a recent report sponsored by NYC Mayor Eric Adams and NYC Comptroller Brad Lander, A Better Contract for New York: A Joint Task Force to Get Nonprofits Paid On Time. The Task Force wrote, “For years, the City’s onerous and slow procurement process has created considerable registration delays that hinder nonprofits’ ability to get paid on time and meet their obligations. In Fiscal Year 2022, over three-quarters of the City’s contracts with nonprofit organizations were registered after the start date.” The Task Force has recommended a series of reforms to the contracting process, which have been embraced by both the Mayor and Comptroller, and which may take some time to implement.
While remaining hopeful that the City will make necessary reforms in the long run, the finance team at The Bronx Defenders began immediately shopping around for a new banking relationship that is more comfortable with the notion that the City, while chronically late, will ultimately stand behind its commitments.
In the meantime, FJC has provided a $4 million bridge loan, which will give The Bronx Defenders some breathing rooms as it secures a banking relationship with a new financial institution. The loan bridges proceeds from contracts with the NYC Mayor’s Office of Criminal Justice and the NYC Office of Human Resources Administration.
“The loan from FJC could not have come at a better time. We had run out of options and were facing the possibility of having to close our doors and turn away New Yorkers in dire need of our services,” says Justine Olderman, Executive Director of The Bronx Defenders.
The Bronx Defenders is a public defender nonprofit that also seeks to transform the legal system to make it more equitable for low-income people. They have pioneered a ground-breaking, nationally recognized team-based model of representation called holistic defense that connects clients to an interdisciplinary team of lawyers, social workers, and advocates. Each year, they defend over 20,000 low-income New Yorkers in criminal, civil, family, and immigration cases, and reach hundreds more through their community intake and outreach programs. They take what they learn from this holistic approach and launch innovative initiatives designed to bring about real and lasting change for the communities they serve.
Says Olderman, “Thanks to the loan from FJC, BxD will be able to continue its mission of defending low-income people facing incarceration, deportation, family separation, and eviction; advocating for laws and policies that advance fairness and equity; and training public defenders from one end of the country to the next on our holistic model. “