Can Nonprofits Get SBA Loans? Here’s What You Need to Know

Running a nonprofit organization is a powerful way to make a difference, but funding remains one of the biggest challenges for mission-driven leaders. Many organizations wonder, “Can nonprofits get SBA loans?”  While SBA financing is traditionally designed for small businesses, certain programs and options may still be available to qualified nonprofit entities. Whether your goal is to expand community programs, hire essential staff, or cover day-to-day operational costs, understanding how SBA loans work and whether your nonprofit qualifies can open new doors for growth and sustainability.

However, the truth is that most nonprofits don’t qualify for SBA loans. These programs mainly support for-profit businesses, prompting nonprofits to explore alternative and strategic ways to access funding.

Still, that doesn’t mean there are no options, and understanding the landscape is the first step toward making informed financial decisions for your organization.

Why Most Nonprofits Don’t Qualify for SBA Loans

SBA loans are designed to help small, for-profit businesses succeed through affordable financing backed by the federal government. To be eligible, an applicant must:

• Operate as a for-profit business.
• Be independently owned and operated.
• Be physically located and operating within the U.S.
• Have the ability to repay the loan through business income.

Because nonprofits are tax-exempt organizations, their revenue structure typically doesn’t align with the SBA’s criteria. Nonprofits rely heavily on donations, grants, and community funding, which means they aren’t considered profit-driven, a key requirement for SBA approval.

As a result, the standard SBA programs, such as the 7(a) Loan Program and 504 Loan Program, are not open to most nonprofit organizations.

Exceptions: When a Nonprofit May Still Qualify

While the SBA’s general rules exclude nonprofits, there are certain exceptions or circumstances where a nonprofit organization may still access funding:

1. Nonprofit Childcare Centers
   Some nonprofit childcare organizations can qualify under specific community-based microloan programs. These loans may help fund equipment, facility improvements, or expansion efforts for childcare services that meet local needs.
2. Community Development Corporations (CDCs)
   Nonprofits structured as CDCs may participate in community development programs or partner with SBA-certified entities to facilitate local economic growth. These organizations sometimes act as intermediaries, helping small businesses access 504 loans or other funding streams.
3. For-Profit Subsidiaries of Nonprofits
   If a nonprofit operates a legally separate for-profit arm, such as a thrift shop, café, or training center, that entity could qualify for SBA financing. The subsidiary must have its own tax ID, financial records, and demonstrate independent revenue generation.

These scenarios are relatively rare but offer potential pathways for nonprofits looking to leverage SBA-backed opportunities.

Temporary SBA Programs That Included Nonprofits

During national emergencies, such as the COVID-19 pandemic, the SBA temporarily expanded its programs to include nonprofits through initiatives like:

• The Paycheck Protection Program (PPP), provided forgivable loans to help organizations retain employees.
• The Economic Injury Disaster Loan (EIDL) program offers working capital loans to eligible nonprofits facing financial hardship.

While these programs were a lifeline for many nonprofit organizations, they were temporary measures and have since closed. Nonetheless, they demonstrated that nonprofit entities can effectively use structured financial aid when given access, reinforcing the need for broader financial inclusion in future SBA programs.

Funding Alternatives to SBA Loans for Nonprofits

If your nonprofit doesn’t qualify for SBA financing, don’t be discouraged; there are many other funding options available that align with your mission-driven structure:

• Community Development Financial Institutions (CDFIs)
  These mission-based lenders provide affordable loans designed specifically for nonprofits and community projects.
• Government and Foundation Grants
  Explore opportunities from federal, state, and private foundations that support causes aligned with your work, from education and housing to healthcare and sustainability.
• Social Enterprise or Nonprofit Lenders
  Some financial institutions specialize in supporting nonprofits and social enterprises, offering flexible terms and interest rates.
• Fiscal Sponsorship Platforms
  Platforms like Crowded can help organizations manage funds, compliance, and reporting through structured fiscal oversight.

These funding options can provide stability, flexibility, and sustainability without the barriers of traditional SBA programs.

Building Financial Readiness and Transparency

Even if your nonprofit isn’t applying for a loan right now, maintaining strong financial readiness is essential. Having your records, compliance documents, and policies in place can open doors to future opportunities.

Make sure your organization maintains:

• IRS determination letter (proof of 501(c)(3) or other nonprofit status)
• Up-to-date financial statements, including budgets and annual reports
• Board-approved resolutions for financial decisions or borrowing authority
• Detailed revenue tracking, even for grants and donations

When you demonstrate accountability and transparency, funders and partners gain confidence in your ability to manage resources responsibly, which strengthens your credibility and sustainability.

How Scout Financial Helps Nonprofits Succeed

At Scout Financial, we believe every nonprofit deserves the financial tools and guidance to thrive. Whether you’re managing grants, tracking multiple programs, or preparing year-end reports, our team is here to simplify your financial operations.

We offer specialized services built for nonprofits, including:

• Accounting and Bookkeeping Solutions tailored to nonprofit requirements
• Fund and Grant Management to ensure transparency and compliance
• Financial Planning and Advisory to help you make data-driven decisions
• Regulatory and Audit Support to meet federal and state standards

Our specialized services are designed to support your mission, ensuring financial transparency, compliance, and efficiency so you can focus on what truly matters—making a difference in your community.

Take Charge of Your Nonprofit’s Financial Future with Scout Financial

Even though most nonprofits aren’t eligible for SBA loans, there’s no shortage of ways to secure funding and strengthen your organization’s financial health. The key is having the right financial partner by your side.

Scout Financial empowers nonprofits to thrive, with expert accounting, clear reporting, and strategic financial planning.

Get in touch with Scout Financial today to streamline your operations, manage your funds confidently, and build a foundation for long-term success.