Your Nonprofit Might Run on Passion, But the Bank Runs on Credit

I know I’ve said this before in a few other posts, but hear me out—this one is important. In a (recent) previous life, I was a master’s level higher education instructor teaching a course on management and leadership in the nonprofit sector. It was a great course with a solid textbook that laid out the “how-to” of starting and managing a nonprofit. We followed the chapters in order—start-up, governance, funding strategies, compliance—you name it. But, just like I’ve said before, there are so many things about launching a nonprofit that are not in the textbook, and let me tell you, I’ve been learning those things along the way and some of them... the hard way.

One lesson that didn’t make the syllabus? Credit scores. Not just credit scores generally speaking but your personal credit score matters—a lot. If you're anything like me, you're thinking, “Wait, what does my personal credit have to do with my nonprofit?” This is not the separation of church and state. However, to answer your question, the short story, in case you stop reading now - everything.

One of the things I’m most proud of, as a young and relatively small organization, is that we carry no debt—no outstanding loans, no lines of credit. This work was built, quite literally, on personal dollars. The reality is, and I didn’t fully grasp this at first, that as a nonprofit there aren’t many options outside of start-up programs and grants. Truth is, most banks won’t even look at you for a loan or line of credit until you’ve been operating for at least two years. If you’re in the nonprofit start-up world—or planning to be—take note: your personal credit score can be the very thing that makes or breaks your ability to move your mission forward.

Here’s why:

• Business Credit Starts with You – In the early stages, your nonprofit likely doesn’t have credit history. Lenders, vendors, and even landlords often look at the founder’s personal credit when deciding whether to extend services or approve applications. They have to pull information from somewhere, right?

• Grant Cash Flow vs. Reality – Grants are wonderful, but they take time to come through. Sometimes, you need a bridge—maybe a credit card, a line of credit, or even a loan to keep the lights on until funding hits. If your score isn’t strong, those options shrink dramatically.

• Trust and Perception – Like it or not, your financial habits can signal stability (or the opposite) to partners and funders. Fair or not, it’s reality.

  
  

When I launched Meryl’s Safe Haven, I thought the biggest financial hurdle would be fundraising (and don’t get me wrong, that’s huge), but the truth is that operating expenses don’t wait for donations. Payroll, insurance, software subscriptions, office supplies—they’re all sitting there, waving at you with a smile, saying, “Pay me ... now.”

Remember that “cha-ching” sound I talked about in another post? I hear it every time I sign a new contract or process payroll and, once upon a time, it was louder when I was loaning the organization money to cover things like payroll and delaying the reimbursement to myself to ensure everything was going to be okay. Having a solid personal credit score has given me options—and when you’re in start-up mode, options equal oxygen; at the very least, sleep.

Here are a few things I’ve learned along the way:

• Pull Your Credit Report – Know where you stand before you start applying for anything.

• Separate Business and Personal Early – Open a business checking account and EIN as soon as possible, but understand that in the beginning, you are still the back-up plan for most lenders.

• Build Responsibly – If you need to leverage personal credit, do it strategically. Avoid overextending because the stress of debt can pull focus from your mission.

• Think Ahead – A low score today doesn’t mean forever. Make a plan to improve it while your organization grows.

In all of this, even as the founder, the organization is expected to carry itself. You should not be the personal guarantor for ANY of the organization's agreements - that 501c3 status

is your personal protection.

Starting a nonprofit is an incredible journey, but it’s also a crash course in realities most of us never think about. If you’re reading this and considering launching your own mission-driven organization, let this be a gentle nudge: take care of your credit. It will take care of you—and, ultimately, your vision and that line of credit you may need one day.

As we continue building Meryl’s Safe Haven, I’ll keep sharing the lessons I’m learning—the textbook stuff and the not-so-textbook stuff—because transparency helps us all grow. And while I speak from experience, please note I am not a tax advisor, attorney, or on your board - check in with the experts before diving in.

Credit Scores Are Free, Tips Don't Have To Be