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Where Do I Begin in Getting Our Nonprofit Group Out of Debt Quick? – Ejay

I am the Treasurer of a non-profit non-stock corporation educational Institution which is a hundred one years old.

It has assets of 411M, 410M in fixed assets, lands and buildings; liabilities is 22M. Cash as of this writing is 1M.

It has a monthly operating expense 5M. Receivables until March is 6M. We have reached the maximum of our credit facilities with two banks and we have failed to meet our obligations including service providers and our employees. Lately, we have been borrowing from individuals with exorbitant interest rates of 10% monthly.

This is the result of the downsizing to reduce expenses.

The members of the Board of Trustees seem to be divided and wouldn’t get their acts together regarding legal matters of ownership and legitimacy of membership to the Board. The situation is so complicated, but life in the Institution must go on.

I read a lot of wonderful testimonials of how you have helped them. I hope you can do the same to me.

EJAY

Don’t miss our free Get Out of Debt – “How To” Guide Series on a number of topics, for loads of practical advice, tips, and help to beat back debt. – Click Here

The Answer

Dear EJAY,

Well I generally help individuals but it sounds like your situation is basically similar. In your case you are asset rich and cash poor.

Your hurdles appear to be a board which is paralyzed from taking the necessary steps to address the situation.

Since you’ve maxed out your legitimate borrowing avenues and have now turned to expensive “alternative” financing, you’ve essentially put your debt and downward spiral into turbo and this will accelerate your downfall.

The solution to this problem is going to depend on the board making some difficult decisions. Without them onboard I’m afraid it does not look good.

Is the board fully aware of the current borrowing that’s going on? I’m surprised they would go along with that.

Basically you have two primary options. You can either increase income or reduce expenses. Part of that expense reduction should be a good hard look at selling assets to make you leaner, cash rich, and ready to survive another 100 years.

If you need a very good, but expensive, non-profit law firm to assist the board to understand their personal liabilities in this and get their act together, you may want to contact Venable.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

Where Do I Begin in Getting Our Nonprofit Group Out of Debt Quick?   Ejay
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Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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