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Can NGOs Get Business Loan Operating Their Business?

Can NGOs Get Business Loan Operating Their Business?

Although NGOs do not make profit, they often need capital to further their cause. They rely on various funding sources to meet their requirements. But can NGOs get a business loan? Find out in this article.

Business financing for NGOs

NGOs also operate like enterprises and need funding for salaries, equipment, training, office space, etc. However, being non-profit, any money they earn is reinvested in the organisation.

As a result, they are deemed as high-risk borrowers. While no laws state that NGOs cannot be granted loans, since the probability of repayment is low, securing business finance is often difficult. If they get a loan, it will likely be against high-value collateral, strong financial standing, or high business loan interest rates.

Alternative options

As non-profit organisations, NGOs rely on various other methods for raising funds to finance projects, facilitate operations, pay salaries, and cover overhead costs. Let’s take a look.

Non-profit grants

Many charities and foundations offer grants to NGOs that are aligned with their mission statement. Grants are free funds that an NGO can obtain without any clause or repayment obligations. You can choose an organisation for raising funds based on grant type, geography, your cause, type of service, etc.

Before approaching the corporation, you must prepare a grant proposal. NGOs typically hire grant writers to draft a proposal outlining their funding requirements and how they plan on using the funds. The grant provider may ask you to submit NGO-related documents and other necessary paperwork.

Additional Read: All You Need to Know about PMRY Loans

Corporate Social Responsibility (CSR) programmes

Many organisations have a dedicated budget for CSR activities. You can approach them to receive funding in the form of sponsorships or donations. You can begin by visiting the websites of big corporations and businesses to familiarise yourself with their charity and CSR programmes.

Government funding

NGOs can also reach out to government agencies for fundraising. The Indian government has many schemes for non-profit organisations to secure grants and funds. Depending on your organisation’s goal, you can apply to various departments. Rural development, environment, forest and climate change, tribal affairs, empowerment of people with disability, women and child development, and 30 other departments offer funding to eligible NGOs.

Additional Read: How to Get a Small Business Loan from the Government

Membership dues

Various NGOs design membership programmes to extend additional engagement opportunities for members against donations or membership fees. This can boost your annual fund, benefit your campaigns, keep your workspace up and running, cover your membership benefits, and help provide scholarship for special causes.

The bottom line

Securing business loansfor NGOscan be challenging due to their organisational structure.  However, various foundations, charities, and government schemes provide support through donations, sponsorships, grants, etc.

If your business requires financing, turn to Tata Capital. With us, access high loan amounts at attractive interest rates. Enjoy easy business loan eligibility, quick disbursals, and extended loan tenures.

Fund your business expansion, cash flow, equipment and inventory needs, and more with us. You can use our business loan EMI calculator to calculate your repayment and decide your loan tenure and EMI amounts.

Check out our website, give us a call, or visit your nearest Tata Capital branch right away.

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