Basically, the banks aren't lending, and state government aren't making their usual payments, so non-profits are suddenly cash poor. Another example of how credit is used to help businesses and non-profits get by while waiting for expected revenue. It's a bit like working for yourself - the money changes each month, so you have to find a way to pay all your bills, which don't go away in lean months. In the past, people went to the bank for short-term loans. Now they can't.
SCO is one of hundreds of charities caught in the credit crunch as skittish banks reduce their lines of credit or cut them off entirely at a time when the need for their services is climbing sharply, nonprofit leaders say....
Almost three-quarters of nonprofits in the United States receive some type of government financing, according to new research by the School of Social Service Administration at the University of Chicago, and about half of those count on that aid for at least half of their budgets.
As a growing number of states delay payment, nonprofits must rely on lines of credit to help them get by. In Illinois, the state is running as much as 150 days late in making reimbursements, and California has told nonprofits to expect i.o.u.’s in lieu of payment starting next month.
“You can just imagine a nonprofit walking into a bank with this tattered envelope from Sacramento saying that some day the state government will pay it,” said Thomas Peters, chief executive of the Marin Community Foundation in Marin County, Calif. “How’s a bank to make a loan against that promise?”
