SeaChange Capital Partners, Main Street Lending 2.0: A Proposal to Support Our Most Vital Nonprofits (2020)
Summary
A briefing note from SeaChange Capital Partners dated May 12, 2020, proposing a Main Street Lending 2.0 for large nonprofits. It argues that nonprofits with 500 or more employees were shut out of both the SBA's Paycheck Protection Program and the Federal Reserve's Main Street Lending Program, although the roughly 6,680 such organizations, less than 1% of 1.6 million nonprofits, account for about $1.5 trillion, about 60%, of nonprofit spending. It estimates a need of two months of expenses, about $251 billion in total or $45 billion excluding hospitals and higher education. It asks the government to confirm that nonprofits over 500 employees can use PPP's alternative test of $5 million of net income and $15 million of tangible net worth, and to create an MSLP 2.0 of ~0%, six-year loans with a one-year deferral for the lesser of 2 months of expenses or $25 million.
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“SeaChange Capital Partners, Main Street Lending 2.0: A Proposal to Support Our Most Vital Nonprofits (2020).”
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MAIN STREET LENDING 2.0
A PROPOSAL TO SUPPORT OUR MOST VITAL NONPROFITS
MAY 12, 2020
Executive Summary
The government distinguishes “large” from “small” organizations in many ways, though the
most common is whether they have 500 or more employees. Nonprofits deemed “large”
under this definition have been completely shut out of the two most important sources of
COVID-19-related financial support: the SBA’s Paycheck Protection Program (“PPP”) and
the Federal Reserve’s Main Street Lending Program (“MSLP”). This is unfortunate because,
while small nonprofits are collectively important, the large ones do most of the work.
This is true not only in higher education and hospitals, but in other areas that support the
well-being of communities including: shelters, emergency food distribution, mental health,
hospice, foster care, nursing homes, and caring for the developmentally disabled.
These large nonprofits are systemically important partners to state and local governments,
and many are on the front lines of the COVID-19 crisis. However, unless they receive
immediate assistance, some will not make it through the next few months; few, if any, will
survive without making drastic cuts to services that will be more vital than ever to our
collective health, well-being, and safety during the COVID-19 crisis and its aftermath.
Given the pressure on their budgets, and the difficulties that states and cities have in
raising immediate funds from taxes or the capital markets, only the federal government has
the scale of available resources to help large nonprofits. Fortunately, there is no need to
develop an entirely new program; PPP and MSLP can be modified to get the job done:
• Our discussions with large social service nonprofits suggest that loans of two
months of expenses would allow them to bridge the unfunded costs associated with
COVID-19 and the one-time restructuring costs that are likely as they shrink in
response to tighter state and local budgets.
• Assuming that this need can be extrapolated to the other sectors, the total need
would be about $251 billion ($45 billion excluding hospitals and higher education);
• The government should immediately make clear that nonprofits with over 500
employees can still qualify for PPP under the alternative test of having $5 million
(or less) of net income and $15 million (or less) of tangible net worth. It should also
provide unambiguous guidance about how to interpret this test given nonprofit
accounting standards;
• A new MSLP program should be created for nonprofits (“MSLP 2.0”) that offers ~0%,
six-year loans (including a one-year deferral) for the lesser of (i) 2 months of expenses
or (ii) $25 million (or better yet, $50 million);
• If risk sharing is important to the Federal Reserve, it should consider allowing third
parties—foundations, board members, etc.—to hold the 5% risk position in the MSLP
2.0 loans;
• Banks and CDFI’s should be given incentives—origination fees, credit against their CRA
obligations—as inducements to participate actively in the program.
Each of these ideas is explored further in this note.
The Universe of Large Nonprofits
The approximately 1.6 million nonprofits in the United States employ 12 million people
and have total expenditures of about $2.5 trillion (about 10% of GDP).1 We estimate that
approximately 6,680 of these organizations (less than 1%) have more than 500 employees.
These “large” groups represent about $1.5 trillion—about 60%—of all nonprofit spending
and a similar fraction of employment.
Table 1 shows the composition of these organizations by size and sector. Although
hospitals and higher education institutions dominate in terms of spending (and most
hospitals and higher education institutions are large), approximately 60% of all social
service spending is also accounted for by large groups. Large nonprofits tend to be
particularly important in areas like residential care (e.g. homeless shelters, foster care,
homes for the developmentally disabled, etc.) where smaller organizations do not have the
capacity (technology, HR, finance, compliance, etc.) or the scale to do the work.
Table 2 shows the financial results (pre-COVID-19) of large nonprofits divided by sector:
• Nonprofits have low margins. Average aggregate margins are 5.3%, ranging from 8.1%
in arts & culture and higher education, to 1.5% in social services.
• Philanthropy represents only 7.6% of revenue, ranging from 34.7% in arts & culture
to 2.2% in hospitals and health care.
• Large nonprofits have cash (including savings), unrestricted net assets (i.e. equity),
total financial assets, and operating reserves equal to 1.5, 8.9, 10.9, and 3.6 months of
expenses, respectively.
The aggregate results shown in Table 2 conceal the very different circumstance facing
individual organizations and sectors. This becomes clear when the data are disaggregated.
Table 3A-C show the distribution of financial results by size and sector:
• The median social services nonprofit has a margin of 1.0%, gets 3.6% of its revenue
from philanthropy (including investment income), has total financial assets (including
endowments and other assets that are subject to legal restrictions) equal to 1.9
months of expenses, and operating reserves of less than one month of expenses.
• By contrast, the median arts & culture nonprofit has a margin of almost 5%, gets 49%
of its revenue from philanthropy (including investment income), has total financial
assets equal to 14.7 months of expenses, and operating reserves of 1.5 months of
expenses.
• Less than 20% of large nonprofits have 6 months or more of operating reserves,
a widely accepted standard for “financial strength” for nonprofits. Social services
organizations are the most fragile, with less than 10% reaching this standard.
The precarious financial condition of large social service nonprofits is not the result
of inefficiency or poor management. It is the inevitable consequence of the context in
which they operate. These organizations are overwhelmingly funded by government in
recognition of the critical role they play as a foundation for the well-being of communities.
1 See the Technical Appendix for methodological details.
Unfortunately, government funding seldom covers the full cost of doing the contracted
work, so there is simply no way for the nonprofits to generate the surplus required to
build reserves. Government funding also creates cash-flow challenges since, unlike grants, it
is paid after the work has been completed, can be subject to long and unpredictable delays
in payment, and the associated quasi-receivables are not conventionally financeable.2
Needs Emerging from COVID-19
The COVID-19-driven credit needs of large nonprofits differ greatly by sector:
• Social services groups have seen an increase in demand and in the costs associated with
keeping staff and clients safe. These nonprofits offer resources like food assistance,
housing, and emergency child care that all are in high demand right now to meet
the needs of struggling families. In addition to covering the increased costs of these
services, these groups also face prospective restructuring costs associated with the
need to shrink/restructure in the face of inevitable reductions in state and local
budgets. The main issue facing these groups is cash flow because their primary
customers—state and local governments—have been unable or unwilling to pay for
the increased costs on a timely basis even though some of these costs are associated
with hiring more staff. Very few of these groups had meaningful pre-COVID-19
reserves. Over time, however, the large groups should be able to live within the
strictures of the available government funding; surviving until then is the challenge.
• Hospitals have suffered from a shift in demand with associated losses. They are
overwhelmingly based on fee-for-service revenue and are suffering (financially) from
COVID-19 because of a shift in demand from higher-margin elective procedures
towards loss-generating COVID-19-related work. They also face higher costs
associated with keeping staff and patients safe.
• Higher education institutions face highly uncertain demand, increased costs, and over-
capacity in a competitive market. Private nonprofit colleges were already under
a great deal of strain pre-COVID-19, and many were in difficult financial shape
(notwithstanding the large endowments enjoyed by a few super-elite institutions).
COVID-19 has depressed revenue because of reduced enrollment among new
and returning students and has reduced gifts, executive education, summer camps,
and other supplemental programs. To a lesser degree, they will also see increased
expenses from financial aid to support students with higher needs due to widespread
employment disruption, the return of this spring’s room and board funds, downward
pressure on tuition, and higher costs for instructional design and technology, facilities
cleaning, and employee health insurance.
• Arts & culture institutions are struggling from the collapse of demand caused by closed
facilities and the associated reduction in earned revenue from tickets, memberships, and
retail. Many of these groups have already laid off much of their staff and are effectively
hibernating. However, they still face unavoidable costs during their hibernation and
must reserve the funds needed to restart once the COVID-19 crisis has abated.
2 Many are “quasi-receivables” because they cannot be assigned and government agencies often reserve the right
not to pay under certain circumstances, including bankruptcy. Nonprofits are often under great pressure to do work
under government contracts before those contracts have become legally binding as described here.
Philanthropy is very important for many large arts groups, giving them more flexibility
but also exposing them to donor sentiment. Those lucky enough to have meaningful
endowments have been forced to begin draining them (though borrowing against
them might be more attractive).
Addressing the Need: Some Rough Math
Our discussions with large social service nonprofits suggest that loans of two months of
expenses would (i) allow them to bridge the unfunded (or not yet funded) increased costs
associated with COVID-19, and (ii) give them the liquidity to cover the one-time costs
likely to be associated with a post-COVID-19 restructuring as they shrink in response to
tighter state and local budgets.
Assuming that this need can be extrapolated to the other sectors, two months of
expenses would total $251 billion in loans. These loans could be repaid from three
sources: future revenue, current unrestricted net assets without donor restrictions, and
future philanthropy. (Philanthropy is more flexible and more easily used to repay debt
than revenue from government contracts.) Ideally these loans would be in addition to,
rather than in lieu of, grant-like support, and would be forgivable (or at least extendable)
under certain circumstances. PPP and MSLP should be modified to provide the necessary
resources.
Payroll Protection Program
PPP is already available to for-profit groups with more than 500 employees, provided
they meet two conditions: (i) net income of $5.0 million or less and (ii) tangible net worth
of $15 million or less. Unfortunately, the SBA has indicated in some of its guidance that
nonprofits are not eligible under these criteria. (This is the consensus view though the
guidance is confusing, appears to revolve around an arcane technical issue, and has been
interpreted by sensible people in different ways.3) Nonprofit ineligibility makes zero sense.
Why would otherwise eligible organizations established for public purposes be less worthy
of PPP assistance than those established for private gain?
Further adding to the confusion, “Net Income” and “Tangible Net Worth” are not labelled
as such on nonprofits’ financial statements, though they have almost exact analogies:
“Change in Net Assets” and “Net Assets Without Donor Restrictions (less Intangibles).”
Table 4 shows that 1,989 organizations (30% of large nonprofits) might be eligible for PPP
under the $5.0 million/ $15 million test. Table 4 also shows that the tangible net worth
part of test is the more stringent, particularly in higher education and arts & culture where
some groups have meaningful real estate or endowments.4
Although the potentially available loans total only $9.4 billion, they would be particularly
important for groups under $100 million, 40% of which would be eligible for loans totaling
$6.7 billion, representing 8% of the total budgets of those eligible. For social service
3 The arcane technical issue is that the SBA does not have size standards for nonprofits since ordinarily it works
only with for-profits. But since PPP (an SBA program!) applies to nonprofits, they need a standard for “small”. Rather
than develop an appropriate standard, they appear to be using 500 employees as an ill-considered default.
4 Real estate, while usually counted in “unrestricted assets”, is often restricted by use-covenants and deed restric-
tions placed on it by former donors (usually government) which greatly reduces its financial value.
organizations, which are typically low-margin and have weaker balance sheets, a full 51% of
organizations would be eligible for $3.4 billion in PPP, representing 7% of the total budgets
of those eligible.
The government should immediately make clear that the $5 million/ $15million test
applies to nonprofits and provide unambiguous guidance about how to interpret it under
nonprofit accounting standards. They should also ensure that there is a “for-nonprofits
only” allocation of PPP to avoid the risk that organizations get crowded out by for-profits
that are more lucrative customers for banks. Although this access to this PPP funding is
not sufficent on its own, and many large nonprofits will not quality even under the $5
million/ $15 million test, the funds would be particularly helpful for the smallest of the
“large” nonprofits.
Main Street Lending Program
The Federal Reserve has stated that “while nonprofit organizations are not currently
eligible under the MSLP program, we acknowledge the unique needs of nonprofit
organizations, many of which are on the front lines providing critical services and research
to fight the pandemic...and will be evaluating the feasibility of adjusting the borrower
eligibility criteria and loan eligibility metrics of the Program for such organizations.”
Modifying MSLP for nonprofits is tricky. The “earning power” of nonprofits is limited and
there is no rough-and-ready measure of their debt-bearing capacity equivalent to the
“EBITDA multiples” used in the for-profit sector.5 However, a modified MSLP program
offering ~0%, six-year loans (including a one-year deferral) could make a huge difference to
large nonprofits while likely incurring only modest losses. We estimate that such a program
might require $251 billion ($45 billion excluding hospitals and higher education institutions,
which have already received $180 billion in targeted aid). While these figures seem large,
$45 billion is only 7.5% of the total MSLP budget.
Table 5 models how MSLP for nonprofits (“MSLP 2.0”) might work. We are assuming that
loans would be available for the lesser of (i) two months of expenses; or (ii) $25 million at
0% interest (or the lowest legally permissible rate) with a one-year deferral followed by a
minimum five-year repayment period. The longer repayment period gives borrowers time
to repay their loans by, in effect, allocating 5% of their revenue over the 5-year period. We
believe this is manageable for well-run organizations. Table 5 also shows how other types
of limits—perhaps based on unrestricted net assets or philanthropy—would affect the
volume of available loans.
The core assumptions behind this type of program are:
• Strong nonprofit management will be able to reduce expenses by 5% for five years to
repay loans which are, in effect, similar to revenue bonds. Those unable to find the
necessary efficiencies will have time to enter into thoughtful mergers, joint-ventures,
or restructurings without undue disruption in services;
5 Cash-flow based lending to nonprofits is limited. Most lending is asset based, with a heavy concentration in real
estate develoment (e.g. affordable housing, community facilities, etc.). Nonprofit leaders have been rightly reluctant
to use debt to cover even temporary operating deficits under “normal circumstances”. Our discussions with larger
groups suggest that most have been rebuffed in their requests to increase existing lines of credit.
• All nonprofit stakeholders—including philanthropy and state/local government—
recognize the wisdom of allowing a small portion of their future payments to
nonprofits to be used to repay the loans that allowed those nonprofits to survive;6
• Shortfalls in repayment from future revenue could be made up, in part, through the
realization of net assets already on the books, though this might take time. Better
yet, these loans could be structured as revenue bonds with a repayment requirement
equal to a percentage of revenue for as long as it takes for repayment and with the
ability to defer under certain circumstances;
• MSLP 2.0 uses the $25 million size limit for new loans in the existing MSLP program.
This limit makes the loans of limited use to the very largest nonprofits, many of
which are concentrated in hospitals and higher education. However, these sectors
have received, and may continue to receive, more specific support. The Federal
Reserve should consider a higher limit of $50 million for the nonprofits in sectors
that have not had access to other forms of support.
While banks and CDFIs are best positioned to underwrite and manage the MSLP 2.0 loans,
it is unlikely that conventional banks would be interested in holding a risk position—even
5%—in zero-interest (or even very low interest) loans. If risk sharing is important to the
Federal Reserve, it should consider allowing third parties—foundations, board members,
etc.—to hold the 5%. Banks must also be given incentives—origination fees, credit against
their CRA obligations—as inducements to participate in what, while vitally important,
would be a financially unattractive program.
No Time to Waste
Large, systemically important nonprofits are facing a potentially fatal liquidity squeeze.
Unlike for-profits, they will not be able to secure debtor-in-possession financing or to
restructure while continuing to operate under the protection of the bankruptcy court.
In addition to the services they provide, large nonprofits also employ millions of relatively
low-wage workers. Failures will create a crisis not only for clients, who will suffer from
a disruption in services, but also low-income staff who will be out of work. Protecting
nonprofits from failure through MSLP 2.0 is a very cost effective job-loss protection
program, particularly for social service organizations which have seen increased demand
and would actually hire more staff provided access to funding.
Large nonprofits that have failed in the past did so for idiosyncratic reasons. In most cases,
they were surrounded by healthy peers who, in partnership with government agencies,
were able to step into the breach to maintain services. This is not the case today. The
failure of any large group—and without almost immediate federal help it will be more than
one—will tear the fabric of the local social safety net with devastating consequences for
clients, staff, and the well-being of the community.
***
It is a great strength of the United States that so much of our health, safety and well-
being is supported by a relatively small group of systemically important nonprofits. These
6 Many government contracts specify allowable and disallowable costs. Debt service is seldom an allowable cost in
state and local government contracts. Philanthropy is more flexible.
mission-driven organizations have done a far better job than the other two options: direct government
provision or profit-seeking corporations. In COVID-19, these nonprofits face an extinction-level event.
Yet, so far, they have been excluded from the most important COVID-19-related assistance. If things don’t
change immediately, some of these nonprofits will falter, leaving their employees, the communities they
serve, and even the U.S. taxpayer far worse off than if they had been given the support to make it through
this crisis. The clock is ticking.
TABLE 1 shows the distribution of large nonprofits based on data from the most recent IRS Form 990.
For example, the 166 Arts & Culture organizations are 2.5% of the total by count and 0.9% by expenditure.
All in US$ 000,000s
Number of Total Total Total Unrestricted Operating
Organizations Expenses Assets Net Assets Net Assets Reserves
Arts & Culture 166 $ 14,088 $ 57,502 $ 45,411 $ 19,098 $ 2,932
Higher Education 976 $ 246,110 $ 861,953 $ 618,441 $ 270,675 $ 47,759
Hospitals & Health Care 2,847 $ 983,704 $ 1,444,600 $ 692,829 $ 635,850 $ 244,559
Social Services 1,548 $ 120,769 $ 129,256 $ 49,895 $ 38,885 $ (5,295)
Other 1,143 $ 141,356 $ 345,543 $ 224,716 $ 150,957 $ 106,506
Total 6,680 $ 1,506,028 $ 2,838,854 $ 1,631,292 $ 1,115,464 $ 396,461
Organizations by Sector and Size
<$100MM <$250MM <$500MM <$1.0BN $1.0BN+ Total (#)
Arts & Culture 135 24 5 1 1 166
Higher Education 542 275 82 35 42 976
Hospitals & Health Care 1,304 672 422 249 200 2,847
Social Services 1,299 197 41 7 4 1,548
Other 874 166 57 27 19 1,143
Total (#) 4,154 1,334 607 319 266 6,680
Arts & Culture 2.0% 0.4% 0.1% 0.0% 0.0% 2.5%
Higher Education 8.1% 4.1% 1.2% 0.5% 0.6% 14.6%
Hospitals & Health Care 19.5% 10.1% 6.3% 3.7% 3.0% 42.6%
Social Services 19.4% 2.9% 0.6% 0.1% 0.1% 23.2%
Other 13.1% 2.5% 0.9% 0.4% 0.3% 17.1%
Total (%) 62.2% 20.0% 9.1% 4.8% 4.0% 100.0%
Total Expenditure by Sector and Size
<$100MM <$250MM <$500MM <$1.0BN $1.0BN+ Total Expenditure ($)
Arts & Culture $ 6,788 $ 3,525 $ 1,836 $ 549 $ 1,391 $ 14,088
Higher Education $ 31,598 $ 42,277 $ 28,065 $ 24,600 $ 119,571 $ 246,110
Hospitals & Health Care $ 72,367 $ 109,119 $ 149,466 $ 169,568 $ 483,184 $ 983,704
Social Services $ 64,269 $ 29,411 $ 13,843 $ 4,358 $ 8,888 $ 120,769
Other $ 44,573 $ 25,130 $ 19,567 $ 19,082 $ 33,005 $ 141,356
Total Expenditure ($) $ 219,595 $ 209,461 $ 212,776 $ 218,158 $ 646,039 $ 1,506,028
Total Expenditure
<$100MM <$250MM <$500MM <$1.0BN $1.0BN+ Total
Arts & Culture 0.5% 0.2% 0.1% 0.0% 0.1% 0.9%
Higher Education 2.1% 2.8% 1.9% 1.6% 7.9% 16.3%
Hospitals & Health Care 4.8% 7.2% 9.9% 11.3% 32.1% 65.3%
Social Services 4.3% 2.0% 0.9% 0.3% 0.6% 8.0%
Other 3.0% 1.7% 1.3% 1.3% 2.2% 9.4%
Total Expenditure (%) 14.6% 13.9% 14.1% 14.5% 42.9% 100.0%
Expenditure by Size per Sector (%)
<$100MM <$250MM <$500MM <$1.0BN $1.0BN+ Total
Arts & Culture 48% 25% 13% 4% 10% 100%
Higher Education 13% 17% 11% 10% 49% 100%
Hospitals & Health Care 7% 11% 15% 17% 49% 100%
Social Services 53% 24% 11% 4% 7% 100%
Other 32% 18% 14% 13% 23% 100%
Total (%) 32% 18% 14% 13% 23% 100%
TABLE 2 shows all the large (over $30 million) nonprofits in each sector as if they were a single organization.
For example, the 1,548 large organization in social services have total revenue of $122 billion.
Income Statement ($million's)
Arts & Higher Hospitals Social Other Total
Culture Education Services
No. of Organizaions 166 976 2,847 1,548 1,143 6,680
Service Revenue $ 4,762 $ 182,243 $ 950,827 $ 65,762 $ 59,538 $ 1,263,133
Government Grants $ 2,994 $ 24,416 $ 14,329 $ 28,576 $ 33,328 $ 103,644
Philanthropy $ 5,326 $ 28,543 $ 22,414 $ 24,358 $ 40,563 $ 121,204
Investment Income $ 1,614 $ 29,647 $ 27,533 $ 1,900 $ 10,487 $ 71,183
Other $ 640 $ 4,950 $ 18,928 $ 1,998 $ 4,007 $ 30,524
Total Revenue $ 15,337 $ 269,799 $ 1,034,032 $ 122,595 $ 147,923 $ 1,589,687
Expenses $ 14,088 $ 246,110 $ 983,704 $ 120,769 $ 141,356 $ 1,506,028
Net Income $ 1,249 $ 23,689 $ 50,328 $ 1,826 $ 6,567 $ 83,659
Add: Interest $ 194 $ 4,666 $ 12,015 $ 1,367 $ 1,987 $ 20,228
Add: Depreciation $ 1,119 $ 13,175 $ 42,562 $ 3,589 $ 4,680 $ 65,125
EBITDA $ 2,562 $ 41,529 $ 104,905 $ 6,782 $ 13,234 $ 169,012
Balance Sheet ($millions)
Accounts Receivable $ 540 $ 14,577 $ 121,279 $ 8,634 $ 12,298 $ 157,328
Cash + Savings $ 4,009 $ 38,793 $ 100,741 $ 14,471 $ 31,852 $ 189,866
Investments $ 29,183 $ 506,468 $ 444,312 $ 28,756 $ 168,808 $ 1,177,527
Land and Buildings $ 16,796 $ 240,829 $ 434,540 $ 53,392 $ 68,889 $ 814,445
Other $ 6,975 $ 61,286 $ 343,728 $ 24,004 $ 63,695 $ 499,689
Total Assets $ 57,502 $ 861,953 $ 1,444,600 $ 129,256 $ 345,543 $ 2,838,854
Accounts Payable $ 1,972 $ 28,736 $ 133,339 $ 11,215 $ 16,628 $ 191,890
Secured Notes $ 631 $ 17,913 $ 43,248 $ 9,212 $ 24,438 $ 95,442
Unsecured Notes $ 933 $ 24,810 $ 11,797 $ 1,155 $ 7,527 $ 46,221
Tax Exempt Bonds $ 4,341 $ 85,488 $ 244,570 $ 23,009 $ 19,914 $ 377,322
Other Liabilities $ 4,057 $ 72,959 $ 289,198 $ 33,400 $ 48,255 $ 447,869
Total Liabilities $ 11,934 $ 229,906 $ 722,152 $ 77,990 $ 116,761 $ 1,158,743
Restricted $ 26,313 $ 347,766 $ 56,979 $ 11,010 $ 73,759 $ 515,828
Unrestricted $ 19,098 $ 270,675 $ 635,850 $ 38,885 $ 150,957 $ 1,115,464
Total Net Assets $ 45,411 $ 618,441 $ 692,829 $ 49,895 $ 224,716 $ 1,631,292
Operating Reserves $ 2,932 $ 47,759 $ 244,559 $ (5,295) $ 106,506 $ 396,461
Key Metrics
Service Revenue 31.0% 67.5% 92.0% 53.6% 40.2% 79.5%
Government Grants 19.5% 9.0% 1.4% 23.3% 22.5% 6.5%
Philanthropy 34.7% 10.6% 2.2% 19.9% 27.4% 7.6%
Investment Income 10.5% 11.0% 2.7% 1.6% 7.1% 4.5%
Other 4.2% 1.8% 1.8% 1.6% 2.7% 1.9%
Total Revenue 100% 100% 100% 100% 100% 100%
Net Income 8.1% 8.8% 4.9% 1.5% 4.4% 5.3%
Accounts Receivable (Days) 14 22 45 26 32 38
Accounts Payable (Days) 51 43 49 34 43 47
Reserves (Months of Expenses)
Cash + Savings 3.4 1.9 1.2 1.4 2.7 1.5
Cash + Savings + Investments 28.3 26.6 6.6 4.3 17.0 10.9
Net Assets 38.7 30.2 8.5 5.0 19.1 13.0
Unrestricted Net Assets 16.3 13.2 7.8 3.9 12.8 8.9
Operating Reserves 2.5 2.3 3.0 (0.5) 9.0 3.2
TABLE 3A shows the distribution of key income metrics for large nonprofits
For example, the 60% of social service organizations generate 3.2% or less of their revenue from philanthropy.
Net Income Margin
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
Arts & Culture -11.2% -3.1% 0.0% 2.3% 4.6% 7.8% 11.4% 17.7% 27.4%
Higher Education -4.9% -1.3% 0.4% 2.0% 3.7% 5.2% 7.4% 10.5% 15.8%
Hospitals & Health Care -10.1% -2.7% -0.1% 1.1% 2.8% 4.7% 6.7% 9.4% 13.4%
Social Services -5.0% -1.8% -0.3% 0.3% 1.0% 1.9% 3.1% 5.0% 8.6%
Other -8.1% -2.7% -0.1% 0.8% 2.5% 4.3% 7.5% 12.1% 20.1%
Total -7.3% -2.3% -0.1% 0.8% 2.3% 3.9% 6.0% 9.0% 14.1%
Philanthropy (%)
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
Arts & Culture 3.6% 12.9% 24.9% 30.7% 39.2% 44.5% 49.3% 54.3% 69.1%
Higher Education 1.4% 2.9% 4.2% 5.8% 7.1% 8.9% 11.5% 14.4% 21.1%
Hospitals & Health Care 0.0% 0.0% 0.1% 0.2% 0.3% 0.5% 0.9% 1.8% 5.5%
Social Services 0.0% 0.1% 0.4% 0.9% 1.6% 3.2% 7.2% 17.2% 77.8%
Other 0.0% 0.1% 1.6% 5.5% 11.5% 20.0% 32.7% 61.6% 93.5%
Total 0.0% 0.1% 0.2% 0.6% 1.3% 3.3% 7.0% 14.0% 42.8%
Investment Income (%)
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
Arts & Culture 0.0% 0.3% 1.1% 2.4% 3.6% 6.2% 10.7% 14.6% 27.7%
Higher Education 0.4% 1.2% 1.8% 2.6% 3.7% 4.9% 6.9% 9.5% 16.2%
Hospitals & Health Care 0.0% 0.0% 0.1% 0.2% 0.5% 0.8% 1.4% 2.3% 4.2%
Social Services 0.0% 0.0% 0.0% 0.1% 0.2% 0.4% 0.9% 1.8% 4.3%
Other 0.0% 0.0% 0.2% 0.5% 0.9% 1.7% 2.9% 5.7% 11.3%
Total 0.0% 0.0% 0.1% 0.3% 0.7% 1.3% 2.2% 3.9% 8.0%
Invest Income + Philanthropy (%)
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
Arts & Culture 5.2% 15.6% 33.0% 41.6% 49.5% 53.6% 63.0% 70.5% 79.1%
Higher Education 3.4% 5.7% 7.7% 9.7% 12.3% 15.2% 18.7% 24.6% 37.0%
Hospitals & Health Care 0.0% 0.2% 0.5% 0.9% 1.4% 2.1% 3.3% 5.0% 10.5%
Social Services 0.1% 0.4% 0.9% 1.9% 3.6% 6.1% 10.1% 21.5% 80.5%
Other 0.2% 1.4% 4.2% 9.1% 16.8% 26.6% 44.0% 74.8% 97.8%
Total 0.1% 0.5% 1.1% 2.1% 3.7% 6.6% 11.6% 21.3% 54.1%
TABLE 3B shows the distribution of reserves for large nonprofits
For example, the median social service organization has 1.0 months of cash and savings.
Cash/Savings
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
Arts & Culture 0.6 0.9 1.4 1.8 2.5 3.0 3.9 5.3 7.9
Higher Education 0.3 0.5 0.8 1.1 1.4 1.9 2.4 3.0 4.1
Hospitals & Health Care 0.0 0.1 0.3 0.5 0.7 1.1 1.6 2.3 3.7
Social Services 0.2 0.3 0.5 0.7 1.0 1.3 1.8 2.4 3.5
Other 0.2 0.6 1.0 1.4 2.2 3.0 3.9 5.5 8.1
Total 0.1 0.3 0.5 0.8 1.1 1.5 2.1 3.0 4.8
Cash/Savings/Investments
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
Arts & Culture 2.8 4.8 6.6 10.2 14.7 22.9 33.0 46.0 66.4
Higher Education 3.1 5.2 7.1 9.2 11.5 14.5 17.6 23.6 39.6
Hospitals & Health Care 0.0 0.3 0.9 1.7 2.6 3.9 5.5 8.0 12.1
Social Services 0.3 0.6 1.0 1.4 1.9 2.9 3.9 5.7 11.3
Other 0.5 1.4 2.8 4.4 7.0 10.3 14.4 21.5 37.8
Total 0.2 0.7 1.5 2.5 3.8 5.6 8.4 12.4 22.0
Unrestricted Net Assets
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
Arts & Culture (0.1) 1.9 4.2 9.6 12.6 17.5 23.5 27.8 45.0
Higher Education 1.6 3.8 5.6 7.2 8.9 10.5 12.8 16.1 22.5
Hospitals & Health Care - 1.2 2.8 4.3 5.7 7.3 9.0 11.9 17.0
Social Services - 0.7 1.4 2.2 3.0 4.1 5.6 7.5 11.9
Other - 0.5 1.7 3.2 5.1 7.7 12.1 19.4 30.7
Total - 1.1 2.4 3.8 5.4 7.1 9.4 12.8 19.8
Unrestricted Net Assets
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
Arts & Culture (0.1) 1.9 4.2 9.6 12.6 17.5 23.5 27.8 45.0
Higher Education 1.6 3.8 5.6 7.2 8.9 10.5 12.8 16.1 22.5
Hospitals & Health Care - 1.2 2.8 4.3 5.7 7.3 9.0 11.9 17.0
Social Services - 0.7 1.4 2.2 3.0 4.1 5.6 7.5 11.9
Other - 0.5 1.7 3.2 5.1 7.7 12.1 19.4 30.7
Total - 1.1 2.4 3.8 5.4 7.1 9.4 12.8 19.8
Social Services
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
Cash/Savings/Investment 0.3 0.6 1.0 1.4 1.9 2.9 3.9 5.7 11.3
Unrestricted Net Assets - 0.7 1.4 2.2 3.0 4.1 5.6 7.5 11.9
Operating Reserves - 0.7 1.4 2.2 3.0 4.1 5.6 7.5 11.9
TABLE 3C shows the distribution of reserves for large nonprofits by size and sector.
For example, 20% of arts and culture institutions have 4+ years of financial resources.
Social Services
Cash/Savings/Investment
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
$1.0BN+ 0.5 0.5 0.5 1.2 2.2 3.1 4.1 4.9 5.8
<$1.0BN 0.5 0.5 0.5 0.6 0.8 0.8 0.9 1.1 6.4
<$500MM 0.1 0.4 0.5 0.7 0.9 2.3 3.3 4.4 6.0
<$250MM 0.3 0.6 0.8 1.2 1.6 2.1 4.1 5.3 9.5
<$100MM 0.3 0.6 1.0 1.4 2.0 2.9 4.0 5.8 11.8
Total 0.3 0.6 1.0 1.4 1.9 2.9 3.9 5.7 11.3
Arts & Culture
Cash/Savings/Investment
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
$1.0BN+ 21.5 21.5 21.5 21.5 21.5 21.5 21.5 21.5 21.5
<$1.0BN 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7 4.7
<$500MM 5.5 5.5 6.5 8.4 10.3 27.5 44.8 61.0 76.4
<$250MM 4.5 4.7 6.4 10.7 19.2 23.1 40.3 49.9 60.9
<$100MM 2.7 5.0 7.1 10.7 13.7 23.0 32.7 42.3 66.4
Total 2.9 4.9 6.8 10.3 14.7 22.8 33.0 46.0 66.4
Higher Education
Cash/Savings/Investment
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
$1.0BN+ 5.6 10.6 12.3 15.8 20.9 26.3 32.5 45.8 73.8
<$1.0BN 6.7 9.6 11.5 14.5 15.9 17.5 18.1 19.5 25.1
<$500MM 3.0 6.7 8.8 11.6 13.7 16.2 20.1 29.2 48.4
<$250MM 4.9 7.1 8.9 11.3 13.4 16.4 18.9 27.6 55.1
<$100MM 2.6 4.6 5.6 7.3 9.5 12.0 15.5 20.0 28.3
Total 3.1 5.2 7.1 9.2 11.5 14.5 17.6 23.6 39.2
Hospitals & Health Care
Cash/Savings/Investment
Distribution 10% 20% 30% 40% 50% 60% 70% 80% 90%
$1.0BN+ 0.3 1.2 2.2 3.5 4.9 6.1 7.7 9.7 13.2
<$1.0BN 0.0 0.7 1.7 2.8 4.0 5.5 7.6 9.2 13.8
<$500MM 0.0 0.2 0.9 1.6 2.7 4.4 6.2 8.3 11.7
<$250MM 0.0 0.2 0.6 1.4 2.4 3.7 5.3 8.0 12.8
<$100MM 0.0 0.3 0.8 1.5 2.3 3.3 4.6 7.1 11.2
Total 0.0 0.3 0.9 1.7 2.6 3.9 5.5 8.0 12.1
TABLE 4 shows large nonprofits eligible for PPP under the alternative net income and net worth criteria.
For example, 1,356 social services organizations with total budgets might be eligible for $3.4 billion in loans.
Net Income <$5.0 Million
# Expenses Total Loans Avg Loan Loans (% of Exp) Eligible (%)
Arts & Culture 103 $ 6,828 $ 454 $ 4.4 6.7% 62%
Higher Education 573 $ 54,577 $ 3,065 $ 5.3 5.6% 59%
Hospitals & Health Care 1,645 $ 251,498 $ 10,927 $ 6.6 4.3% 58%
Social Services 1,356 $ 98,828 $ 6,637 $ 4.9 6.7% 88%
Other 800 $ 75,240 $ 3,462 $ 4.3 4.6% 70%
Total 4,477 $ 486,971 $ 24,545 $ 5.5 5.0% 67%
Tangible Net Worth <$15.0 Million
Sector # Budget Total Loans Avg Loan Loans (% of Exp) Eligible (%)
Arts & Culture 40 $ 2,540 $ 179 $ 4.5 7.1% 24%
Higher Education 148 $ 21,858 $ 649 $ 4.4 3.0% 15%
Hospitals & Health Care 761 $ 137,914 $ 4,593 $ 6.0 3.3% 27%
Social Services 818 $ 54,912 $ 3,505 $ 4.3 6.4% 53%
Other 435 $ 42,315 $ 1,686 $ 3.9 4.0% 38%
Total 2,202 $ 259,539 $ 10,611 $ 4.8 4.1% 33%
Satisfy Net Income and Net Worth Tests
Sector # Budget Total Loans Avg Loan Loans (% of Exp) Eligible (%)
Arts & Culture 30 $ 1,639 $ 121 $ 4.0 7.4% 18%
Higher Education 116 $ 10,466 $ 460 $ 4.0 4.4% 12%
Hospitals & Health Care 678 $ 81,371 $ 3,980 $ 5.9 4.9% 24%
Social Services 792 $ 52,112 $ 3,395 $ 4.3 6.5% 51%
Other 373 $ 29,431 $ 1,430 $ 3.8 4.9% 33%
Total 1,989 $ 175,021 $ 9,387 $ 4.7 5.4% 30%
Satisfy Net Income and Net Worth Tests
All Sectors # Budget Total Loans Avg Loan Loans (% of Exp) Eligible (%)
$1.0BN+ 10 $ 18,899 $ 100 $ 10.0 0.5% 4%
<$1.0BN 19 $ 11,883 $ 158 $ 8.3 1.3% 6%
<$500MM 84 $ 28,962 $ 664 $ 7.9 2.3% 14%
<$250MM 231 $ 35,732 $ 1,720 $ 7.4 4.8% 17%
<$100MM 1,645 $ 79,545 $ 6,745 $ 4.1 8.5% 40%
Total 1,989 175,021 9,387 4.7 5.4% 30%
Satisfy Net Income and Net Worth Tests
Social Services # Budget Total Loans Avg Loan Loans (% of Exp) Eligible (%)
$1.0BN+ 1 $ 2,937 $ 10 $ 10.0 0.3% 25%
<$1.0BN 3 $ 1,970 $ 19 $ 6.2 0.9% 43%
<$500MM 14 $ 4,585 $ 78 $ 5.6 1.7% 34%
<$250MM 65 $ 9,786 $ 406 $ 6.2 4.1% 33%
<$100MM 709 $ 32,834 $ 2,882 $ 4.1 8.8% 55%
Total 792 52,112 3,395 4.3 6.5% 51%
TABLE 5 models a possible Main Sreet Lending Program for nonprofits.
Program Assumptions
Maximum Amount Needed (Months of Expenses) 2.0
Maximum Amount ($Millions) $ 25
Deferral Period (Years) 1.0
Repayment Period (Years) 5.0
Total Loan Term (Years) 6.0
Repayment Capacity Metrics Total Per Year
Revenue (per annum over repayment period) 17% 3.3%
Unrestricted Net Assets ("UNA") 33% 6.6%
Philanthropy 50% 10.0%
Total Loan Program
Total Limits and Metrics
# of Orgs Loans Needed Size Net Assets Philanthropy All Limits
Arts & Culture 166 $ 2,348 $ 1,817 $ 1,799 $ 1,672 $ 1,609
Higher Education 976 $ 41,018 $ 15,444 $ 34,255 $ 13,229 $ 14,006
Hospitals & Health Care 2,847 $ 163,951 $ 49,200 $ 119,230 $ 9,629 $ 38,155
Social Services 1,548 $ 20,128 $ 16,349 $ 9,096 $ 5,914 $ 9,991
Other 1,143 $ 23,559 $ 13,720 $ 13,650 $ 9,833 $ 10,613
Total 6,680 $ 251,005 $ 96,529 $ 178,030 $ 40,277 $ 74,374
Percentage Of Need Based On Limits
Size Net Assets Philanthropy All Limits
Arts & Culture 77% 77% 71% 69%
Higher Education 38% 84% 32% 34%
Hospitals & Health Care 30% 73% 6% 23%
Social Services 81% 45% 29% 50%
Other 58% 58% 42% 45%
Total 38% 71% 16% 30%
Total Need
<$100MM <$250MM <$500MM <$1.0BN $1.0BN+ Total
Arts & Culture $ 1,131 $ 587 $ 306 $ 92 $ 232 $ 2,348
Higher Education $ 5,266 $ 7,046 $ 4,677 $ 4,100 $ 19,929 $ 41,018
Hospitals & Health Care $ 12,061 $ 18,186 $ 24,911 $ 28,261 $ 80,531 $ 163,951
Social Services $ 10,712 $ 4,902 $ 2,307 $ 726 $ 1,481 $ 20,128
Other $ 7,429 $ 4,188 $ 3,261 $ 3,180 $ 5,501 $ 23,559
Total $ 36,599 $ 34,910 $ 35,463 $ 36,360 $ 107,673 $ 251,005
Total Available
<$100MM <$250MM <$500MM <$1.0BN $1.0BN+ Total
Arts & Culture $ 1,028 $ 406 $ 125 $ 25 $ 25 $ 1,609
Higher Education $ 4,477 $ 5,780 $ 1,905 $ 818 $ 1,025 $ 14,006
Hospitals & Health Care $ 8,155 $ 11,078 $ 8,588 $ 5,637 $ 4,697 $ 38,155
Social Services $ 6,712 $ 2,564 $ 551 $ 63 $ 100 $ 9,991
Other $ 5,648 $ 2,691 $ 1,212 $ 660 $ 402 $ 10,613
Total $ 26,020 $ 22,519 $ 12,382 $ 7,204 $ 6,249 $ 74,374
% of Need Satisfied
<$100MM <$250MM <$500MM <$1.0BN $1.0BN+ Total
Arts & Culture 91% 69% 41% 27% 11% 69%
Higher Education 85% 82% 41% 20% 5% 34%
Hospitals & Health Care 68% 61% 34% 20% 6% 23%
Social Services 63% 52% 24% 9% 7% 50%
Other 76% 64% 37% 21% 7% 45%
Total 71% 65% 35% 20% 6% 30%
Total Available Total Cash/Savings/Investment in Months of Expenses
<6 <12 <24 <36 36+ Total
Arts & Culture $ 345 $ 560 $ 875 $ 1,078 $ 531 $ 1,609
Higher Education $ 2,269 $ 6,010 $ 10,667 $ 11,947 $ 2,059 $ 14,006
Hospitals & Health Care $ 23,996 $ 33,249 $ 36,478 $ 37,061 $ 1,095 $ 38,155
Social Services $ 7,646 $ 8,917 $ 9,544 $ 9,789 $ 201 $ 9,991
Other $ 4,098 $ 6,463 $ 8,549 $ 9,318 $ 1,295 $ 10,613
Total $ 38,354 $ 55,200 $ 66,113 $ 69,193 $ 5,181 $ 74,374
% of Total <6 <12 <24 <36 36+ Total
Arts & Culture 21% 35% 54% 67% 33% 100%
Higher Education 16% 43% 76% 85% 15% 100%
Hospitals & Health Care 63% 87% 96% 97% 3% 100%
Social Services 77% 89% 96% 98% 2% 100%
Other 39% 61% 81% 88% 12% 100%
Total 52% 74% 89% 93% 7% 100%
SeaChange champions nonprofits facing complex challenges and is the partner of choice for
funders seeking to help. SeaChange has been active over many years in the financial analysis of
the nonprofit sector. This briefing note was only possible because of data generously provided
by Candid, which helps millions of people get the information they need to do good. To learn
more about what Candid can do for you, visit candid.org. It was also based on the following
reports:
• The Financial Health of the US Nonprofit Sector
• Risk Management For Nonprofits
• Philadelphia Risk Report
• Overhead for Trustees
• New York City Contract Delays
• Closing the Gap: A True Cost Analysis
• Tough Times Call for Tough Action
• Too Big To Fail
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