Finance Firm Helps Nonprofit Agencies With Their Cash Flow : Services: Interest-free loans by the Redondo Beach company help charities get through the crunch while waiting for approved grant money to arrive.
Back in 1989, Gayle Wilson Nathanson had a $30,000 headache.
Nathanson, executive director of the Youth and Family Center of Inglewood, had been awarded government grants totaling that amount, but was uncertain when the checks would arrive. In the meantime, she said there was an urgent need for a program to counsel teen-age mothers and get some of them off welfare.
She found a way to bridge her financial gap at Riviera Finance, a Redondo Beach-based company that offers no-interest loans to charitable organizations that require emergency cash.
The program “could never have gotten off the ground (without Riviera), because we did not have enough cash flow dollars to start it up,” Nathanson said.
Riviera Finance, a finance company, began its loan program in 1989 as a way to mark its 20th anniversary in business.
The firm decided to offer short-term loans to charities that have documentation of grant awards but need the money immediately. The charities then reimburse Riviera Finance when the grants arrive, typically one to three months after the award is made.
David Clark, a partner in Riviera Finance, said it was more than good intentions that motivated him to support the loan program.
“My partner and I have become interested in addressing the problem of drug abuse and drug-related issues because they affect us directly, both in the cost of taxes and in drug use by people who could have been employed by us,” Clark said. “To be honest, the altruism motivation was not as great as one would think. We simply felt responsible as businessmen to get involved.”
Riviera Finance is in the business of “factoring,” a type of loan that is gaining in popularity among small businesses. If a business bills a customer but finds the money is needed before the check arrives, the business can sell the bill to Riviera at a discount and get the cash immediately. The full payment is then received by Riviera, which has 12 branches in the United States and Canada and purchases about $400 million worth of such accounts annually.
“When we originally started (offering loans to charities), we had a fixed sum of money that we could provide. We thought we could give it once to a charity and say we had done our part, but we figured that we could be more effective if we used the money to do what we know best--helping people with their cash flow,” said John Danis, Clark’s partner in Riviera Finance.
“After all, charities have cash flow problems just like businesses,” he said. “With no-interest loans, we can do this on a continual basis and the money becomes a renewable resource.”
So far, Riviera has loaned about $300,000 in amounts ranging from $10,000 to $50,000. Among the nine groups it has helped are the Switzer Center, a Torrance organization that provides counseling to children with behavioral problems; the Centinela Child Guidance Clinic; the Greater Los Angeles Council on Deafness, and the International Assn. of Jazz Appreciation.
Only one loan for $10,000 has not been repaid, Riviera administrator Sylvia Pierson said.
Danis said he is surprised more charities have not sought emergency loans because the company has alerted the United Way about the service.
“I think a lot of agencies feel that there must be a string attached somewhere,” Danis said. “There isn’t one--we do this at our cost.”
A Riviera loan helped start the Youth and Family Center’s New Chance program, which helps hook up teen-age mothers with services, such as job counseling, parenting classes and child care, so those who are on welfare can get off. The program has been operating for three years and serves more than 100 teen-agers annually, Nathanson said.
“We needed a job counselor, if we were going to get people off of welfare,” Nathanson said. “We had an opportunity to get state funds for that, but we could not swing it in terms of start-up costs and the delays that come before it runs smoothly,” she said.
Jean Conger, an administrator of the Switzer Center, said loans from Riviera have been invaluable to her nonprofit organization.
“Often the state funds are slow in coming and get bogged down in a process where documents are reviewed at many levels,” said Conger, whose center has borrowed about $80,000 from Riviera since 1989. “What often happens is that our payroll gets late and service providers have to wait for the money. We used to pay interest to the banks for loans instead of using it for the kids.”
Conger said her organization’s track record of repaying the Riviera loans also helps the center in applying for grants.
“Because Riviera has the confidence in us and the faith in our cause to loan money, this gives us added credibility and a proven track record of repayment that might sway a grant giver to offer funds.”
Nathanson believes the financial problems encountered by many nonprofit groups stem from bureaucratic red tape, not an inability to handle finances.
“I bet you would be very hard pressed to find a nonprofit organization surviving today that doesn’t handle money wisely. Those dollars are few and far between, and to keep agencies going you have to be smart,” Nathanson said.
“Unless we find more creative ways of working collaboratively, (the difficulties in obtaining grant money) will overwhelm everybody. What (Riviera) is doing is probably one of the wisest uses of the money.”
