Non-Profit Organizations (“NPO”) generally comprise a smaller percentage of outstanding loans on the books of community banks however, they represent a risk that are quite unique. Bankers are not required to become an expert in this type of lending because the number of opportunities are few however, when you are approached with a request, you must know how to underwrite them. Most of these loans are extended to Non-Profit Organizations and Religious Organizations.

The skills required to understand and underwrite the credit risks involved in this type of lending is quite different from lending to For Profit Organizations. Unlike conventional loans, Non-Profit Organizations and Religious Organization loans have a higher risk level because they are typically un-guaranteed; the collateral is considered “Special Purpose” with limited resell value; the primary source of repayment is dependent upon contributions from donors and parishioners whose behavior is often volatile due to a disagreement of the organization’s direction or support is affected by a weak economy. Another risk factor includes financial statements that may not follow Generally Accepted Accounting Procedures.

This course will cover the major lending risks related to this type of financing and discusses how a bank can prudently manage these risks by exposing participants to the appropriate methods of analyzing and lending to Non-Profit Organizations and Religious Organizations.

This course will also review Statement of Financial Accounting Standards 117 (now Accounting Standards Codification 958) Required Financial Statements Presentation for NPOs). This Standard replaces Fund Accounting, which was used previously by NPOs for many years.