A recent article in Chronicle of Philanthropy titled “Where Did The Funding Go?” provides a sobering assessment of the nonprofit sector, and highlights FJC’s recent loan to HERE Arts Center as a “creative solution.”

The article by Jim Rendon, published November 20, 2024, notes that organizations across the country are facing dire financial straits that have led to hiring freezes, program cuts, layoffs, and in some cases, closures.  He cites the challenges nonprofits have faced coming out of the Covid-19 pandemic, reduced financial support, and rising costs associated with the recent inflationary economy. 

Finding a bright spot in an otherwise bleak financial picture for nonprofits, the article cites a loan from a new DAF account at FJC, capitalized by donors Jennifer Suh Whitfield, HERE Arts Center’s Board Chair, and her husband Benjamin.

An excerpt is included below, and the full article can be found here.

The past few years have been challenging for HERE Arts Center in New York City. The organization, founded 30 years ago, runs a performance space, but audiences haven’t returned to pre-pandemic levels. The group had been running a deficit for years and was eating into its assets to continue operating. In June, the center’s founding director retired, and it brought on four co-directors.

Donors stepped up and provided additional, often unrestricted funding during the pandemic, but now that the emergency is over, many funders have moved on, says Lauren Miller, one of the center’s new co-directors. Some grant makers changed priorities and dollars have been scarce, she says. Like many new CEOs who have started in the past few years, Miller has found that some donors won’t support an organization in the first years after a leadership change.

“Just when we need new solutions and we need people to think differently and give differently, we’re seeing philanthropy retrench back to the pre-Covid status quo,” she says.

Miller and her co-directors have cut costs. Instead of large, costly productions, the organization is focusing on more one-person shows. It has just nine staff members, down from a peak of 20. The organization is trying to expand its base of donors. The center’s goal is to find a larger number of donors who make modest gifts, rather than depend on a handful of large donors who can give a lot, but who will have a big impact on the group’s finances if their giving changes. Miller wants to partner with other arts groups to seek funding together — many of them have similar missions and even work with the same artists, so why should they compete for money?

The center’s board chair came up with an innovative solution to help it address the financial shortfall. She created a donor-advised fund to give HERE Arts Center a loan. It was money that Miller says the chair was planning to give to charity, perhaps over several years. By structuring the support as a low-interest loan, the group got the money it needed up front. The center is paying back only interest on the loan to start, so the payments are low now while the group needs to conserve funds. The money that the group pays on the loan goes back into the DAF so it can be used for other charitable purposes later.

“By creating these very favorable conditions that can move the money quickly to where we needed it, it protected the organization. It was a real lifesaver,” Miller says. “We could start the next fiscal year fresh without having to make dramatic cuts to our staff or to our programs.”

The DAF was created, and the loan is being serviced by FJC – A Foundation of Philanthropic Funds. The group works with donors to help nonprofits fill funding gaps that government, banks, and other donors and grant makers won’t. A commercial lender never would have made the loan to HERE Arts Center, says Sam Marks, FJC’s CEO.

“You really needed a lender that was looking at it not just from a perspective of credit risk, but from a perspective of really understanding the fundamental business and committed to the mission — a real friendly, mission-based lender,” says Marks.

This creative approach has made Miller optimistic that the center can thrive in the coming years — and also that philanthropy, at least in some places, is starting to become more agile and listen to the needs of nonprofits.

“Those of us who are doing things differently and who are trying to innovate and create more interconnection, partnering with our peers instead of competing with them, and bringing new programs in and widening the aperture of what’s possible for our service, we’re being forced to take calculated risks to survive the present circumstances,” she says. “I think we need philanthropy to be as entrepreneurial and risk taking and innovative if they want to see us succeed in those risks.”

Visit Chronicle of Philanthropy at https://www.philanthropy.com/