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The Game-Changer: Resources for Bay Area Nonprofits

This month, NCG's Collaborative Philanthropy Coordinator, Krystle Chipman, sat down with the Loan Underwriter of the Arts Loan Fund and Principal of Padma Consulting, Margaret Southerland. Margaret shared why she believes the Arts Loan Fund (ALF) can be a game changer for arts nonprofits in the region. 

What is your history with the ALF and what is your current role? 

I have been involved with the ALF for over 15 years. I served on the Steering Committee for three years in my prior role as the California Program Officer for the J.P. Morgan Chase Foundation and J.P. Morgan Charitable Trust.

Since 2006 I’ve provided consulting services to the ALF. Currently, I underwrite the loans and provide due diligence on all of the applications. I review the requests, analyze the financial statements, and interview the Executive Director. I write up my findings and then present them to the Steering Committee at their monthly meetings. The Steering Committee makes the final decision to approve or disapprove the loan request.

Is there a stigma about applying for the loan from members of the Steering Committee since so many of the members are well-known Bay Area arts funders?

Absolutely not. In fact, it is just the opposite for several reasons:

1. An application shows the Steering Committee that the organization’s leadership (Executive Director and board members) is being proactive with its cash flow forecasts and is planning ahead for any shortfalls or months when cash inflows are tight.

2. It is not a nonprofit-best-practice for an organization to borrow from board members or senior staff due to conflicts of interest. If an organization needs a short-term loan, it is better to access outside sources.

3. Bank lines of credit and cash advances from credit cards can be an expensive borrowing option. The ALF interest rates on loans, which depend on the loan product, range from 3.35% to 5.25%. That is much less than the average credit card rate of 16.73% and bank loans can be hard to obtain for small nonprofit organizations.]


4. The ALF wants Executive Directors to be able to cash their paychecks and pay their staff and artists. This is why the loan fund was created. We understand that grant checks are sometimes received later than expected, that money is needed to plan a gala or book a venue for performances or an organization wants to start program planning for an arts education program in a school or school district, or any other program it offers.

What do you want potential applicants to know about the loan process?

Recently we have updated all of our loan applications so there are fewer questions. The interview with the Executive Director is conducted by phone and it takes no longer than an hour. I am available to answer any questions that a potential applicant might have. I often work with the applicant to update the ALF Cash Flow and Funders’ Report templates and we submit a final version to the Steering Committee. The process is not onerous and there is a quick turn-around time for applications.

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