How to Decide If New Construction Is Right for Your Nonprofit
What if no existing building suits your nonprofit organization’s needs? You may just need to move some walls and expand the bathrooms; or you may be in for a major effort to substantially renovate a space or construct a new building.
Even a small organization with the right board and campaign leadership can manage a successful capital campaign if its expectations are reasonable. So can organizations whose projects are happening at the right place and at the right time — such as those organizations qualifying for redevelopment agency funds or for low-interest bank loans for community development.
To determine whether your organization can manage a capital campaign, you should ask yourself some serious questions, including the following:
What will the project cost? Although you can’t design an accurate budget until you have approved architectural drawings and contractor bids, an architect or contractor who’s friendly to your organization should be willing to look at the space and offer rough cost estimates.
Are your board members in a position to contribute to a capital campaign above and beyond their usual annual gifts to your organization?
Do public or foundation resources in your region support capital projects? Would they be likely contributors? (Include in this inquiry low-interest loans for nonprofits.)
Do you have staff knowledge and time to contribute to this effort?
You can find leads to community loan and development funds for nonprofits on two helpful websites: Community Capital (focused more on investors than those seeking help, but still rich with information) and Social Invest.
Having examined these preliminary questions, organizations that are considering capital campaigns often go through a process called a feasibility study — research most often led by a consultant who interviews people who support the organization and other generous donors in their communities whose grants and gifts are essential to its success. Through these interviews, the consultant estimates how much the organization is likely to raise with a capital campaign.
The costs of renovating a building are likely to increase (at a rate of some 10 percent per year), and major donors may pledge contributions but wait a year or longer before sending a check. So, if reasonable interest rates are available, borrowing money to avoid delays and complete construction can help contain costs while you’re conducting a capital campaign and starting construction.
In some areas, local government, foundations, community economic development corporations, or banks may consider awarding low-interest loans as an important form of philanthropy.
As new technology changes the needs of working spaces, and building code requirements become more stringent, renovation of existing buildings may be very costly. Sometimes building a brand-new facility to suit your nonprofit’s needs may be your cheaper and more-efficient choice.