We have had 3 similar inquiries in the past few weeks that sound like this: a board member suggests that your organization eliminates your $5.1 million mortgage. Everyone is excited by the idea. They call us to talk about the possibilities. Sounds great, doesn’t it? In theory yes.
In practice, it might not be the best way to use $5 million dollars. What could you do with that money besides pay off your nonprofit’s mortgage?
Option A – Raise $5.1 million and eliminate the mortgage and save the $275,000 a year in debt service.
Option B – Raise $5.1 million, put the money into an endowment, and use the proceeds to service the mortgage.
Option C – Raise $7.6 million dollars, put it all into an endowment, use the proceeds to pay the mortgage, and increase programming.
Option D – Do nothing because that sounds like a lot of money and we can’t raise that much.
There is no right answer. Instead, there are a lot of factors to decide if you should pay off your nonprofit’s mortgage. Here are 7 considerations:
- Is now the right time for you to raise money? Do you have the volunteers, staff, infrastructure, and know how to run a successful campaign?
- What are the terms of your mortgage? If you have a low fixed rate, the decision may be different than a short-term variable rate.
- How comfortable are you with debt? There are people that live in huge houses and drive luxury cars but are heavily leveraged. Others have no home mortgage and buy cars outright. Neither is right or wrong, but each board member’s personal preference will influence their opinion.
- Do you understand your current donors? Do you know what potential you have within your donor base?
- Do you have a culture of asking? Of course, you want a culture of giving, but that starts with a culture of asking. And if you have not asked them for anything in the past, a big ask is a hard place to start.
- Can you raise that much money just to pay off the mortgage? From a fundraising perspective, it is a hard sell for many people. Especially if they, personally, live with a mortgage. If you add programming or other capital needs into the fundraising plan it offers people a clearer vision of what you want to achieve with their donation.
- There is a difference between practical/realistic and negative perspectives. If most of your board assumes you cannot achieve the goal, you will not achieve the goal.
Wondering if you have what it will take to raise money? Click here to schedule a complimentary consultation and we can help you think through the possibilities.