The Financing Habits of Missouri Nonprofits

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More than half of Missouri nonprofits aren’t interested in pursuing financing in the next year, according to a recent survey. Another quarter, however, might be interested if they could learn more about what’s available.

The St. Louis Fed’s Community Development department recently released a survey of nonprofit leaders in the Show-Me State aimed at better understanding their attitudes toward financing and generating income. This survey is part of an effort to better understand how nonprofits might benefit from impact investing, or investing done with the social return as well as the financial return in mind.

Before jumping into financing, the survey asked about current revenues of nonprofits. The most common sources of revenue were donations (with 89 percent of respondents receiving them) and grants (80 percent). About half of nonprofits (51 percent) received government reimbursements, while only 37 percent generated revenue by selling products or services.

Less than half of respondents (42 percent) currently generate revenue through earned income activities. Of those who used to but no longer do, the most common reason for stopping was a lack of profitability (45 percent).

When it comes to financing in the next year, most Missouri nonprofits aren’t counting on it for their operations, with 54 percent of respondents saying their organizations aren’t interested. However, 28 percent said their organizations might be interested, but they would need to learn more.

That doesn’t mean nonprofits avoid financing altogether. Half of respondents (50 percent) said their organization had previously pursued financing from a bank at some point in their history. Other sources of financing included:

• Community development financial institutions (11 percent)
• Foundations (11 percent)
• Government (9 percent)
• High net worth individuals (6 percent)

Nonprofit leaders were asked if they were interested in developing or expanding goods or services to generate earned income, with 32 percent saying they were and 44 percent responding that they might be. However, more than half had reservations due to time constraints (52 percent) and concern with mission alignment (51 percent), with 47 percent also citing concern over a lack of profitability.

Interestingly, when asked what type of support executive directors need to implement social entrepreneurial activities that generate earned income, 70 percent of respondents said “sources of funding.” (Respondents were asked to name three support items that would be most useful.) Business plan development (64 percent), board engagement (41 percent) and marketing (39 percent) were other top answers.

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