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Chicago Historian Shermann "Dilla" Thomas and his tour bus, purchased with financing from IFF.

Nine Ways Nonprofits Can Invest in Growth in an Uncertain Economic Environment February 22, 2024

Last October, interest rates reached their highest point in more than 20 years, putting pressure on borrowers by increasing the cost of debt capital. And while rates have declined slightly in the months since then, uncertainty remains about when – or if – the cost of borrowing will return to the historic lows of the past two decades. Layer onto that war in the Middle East and Ukraine, continued speculation about the possibility of a recession, and the upcoming elections, and the result is even greater uncertainty about the economic outlook in the year ahead.  

In such an environment, preserving liquidity should be a higher priority to ensure that organizations have the financial flexibility needed to navigate the unknown. This doesn’t mean, however, that investing in growth is no longer possible. For nonprofits with a goal to substantially renovate their space, acquire a new facility, or otherwise invest in the organization’s growth, a multimillion-dollar project budget may not be practical in the immediate future, but smaller capital expenditures that enhance the organization’s capacity and/or deepen its impact can still be worthwhile and cost-effective investments. That’s especially true when those expenditures support eco-friendly facility upgrades, which can result in long-term cost savings.  

And, by leveraging financing to spread the cost over time, nonprofits can complete these types of projects while still retaining cash on hand for other needs that arise. This may sound counterintuitive at a time when interest rates remain elevated, but the difference between two loans with different rates can be minimal when smaller amounts of money are borrowed. For example, for a fully amortized, $50,000 loan with a three-year term, the difference in monthly payments between a five percent interest rate and a seven percent interest rate is $45 per month. In most cases, the benefits of not waiting to invest in the organization’s growth likely will be worth this negligible additional cost. 

With that in mind, we’ve compiled nine capital expenditures that nonprofits might consider in the year ahead to invest in growth – many of which can also support more comprehensive sustainability strategies – that won’t break the bank amid a challenging and uncertain economic environment.