In June 2010, Living Room, the largest provider of HIV supportive housing and housing services in the Atlanta region, approached the Nonprofit Loan Fund for bridge financing. With an annual operating budget of $2 million, the organization was facing a cash flow shortfall due to the fact that, despite consistent on-time payments, its bank had opted not to renew its $100,000 line of credit because of a loss in the prior fiscal year and general tightness in the credit market.
This line, in existence for six years, was used to cover cyclical, short-term cash flow needs resulting from reimbursement delays from the City of Atlanta, especially during the contract renewal phase of its Housing Opportunities for Persons with AIDS/HIV (HOPWA) contracts. Contracts had been renewed in summer 2010, but payments were not expected until October or November 2010. There was now no financing tool to bridge this gap.
To continue operations without a working capital line, Living Room was forced to decrease client services. Now, the organization was seeking funding to restore critical services and avoid additional service cuts. In July 2010, the Nonprofit Loan Fund Advisory Committee approved a $39,000 loan due in December 2010 and secured by the HOPWA contracts. Fortunately, Living Room’s overall financial preparedness put it in a strong position to seek conventional bank financing. In late September 2010, the bridge loan was paid in full through a new line of credit established with a local bank.