Nonprofit lenders have unique needs that are distinct from comparable commercial entities. Whereas a commercial lender likely has a conservative lending portfolio, a nonprofit lender is intentional in originating higher risk loans to at-risk borrowers. Commercial lenders are very deliberate in collection activities whereas nonprofit lenders are often flexible and more understanding of the needs of its borrowers. Nonprofit lenders are also more likely to have a lower tolerance for new technology and can struggle with adoption, support, and generating the analytics to demonstrate their impact.

In this post, we will discuss some of the key considerations a nonprofit lender should think about when selecting a technology platform. We will look at prioritizing flexibility to meet business process needs, usability, and compatibility with other programs as well as philanthropy. We will also consider the total cost of ownership and ensure that analytics and outputs are factors in your decision.

Selecting the correct technology platform is a critical – and difficult – decision for any organization. Ideally, you want to make the right decision the first time. There are some pitfalls you need to avoid in the selection process to find a successful long-term solution. To identify them consider the following.

1. Flexible systems to meet flexible process

Mission-oriented lending organizations, especially nonprofits, have unique needs that defy commercial lending solutions. For example, as a nonprofit lender, you might have extremely flexible repayment terms and need a technology platform to accommodate that. Organizations may offer zero interest loans, interest deferred solutions, or long grace periods before payments are considered delinquent. Make sure that the technology platform you are considering can meet your specific needs, and avoid taking a vendor’s word for it – especially when a commercial solution is being considered.

2. Usability to meet staff expectations

While this might seem like an obvious point, systems training and user guides are not foolproof. People forget what they have been trained on the next day. If the system is not intuitive and easy to use from the beginning, mistakes will be common and can lead to costly bug fixes and re-work. In addition, be sure your requirements not only consider the functional or technical impact, but assess the look and feel. If what you see is functionally correct but uncomfortable to use, remember that your staff will have the same experience.

3. Program and philanthropic compatibility

As a nonprofit lender, your organization has numerous constituencies to answer to – your funders, referral partners, borrowers, and staff, among others. Ask yourself how these needs come together. Consider whether or not your system can grow to track the impact funders need to see, the converted leads referral partners are expecting, the mobility and instant access that borrowers want, and the ease-of-use your staff requires to get their work done efficiently.

Many nonprofit lenders house multiple programs within the organization, of which lending is one (albeit a complicated one). Even if there is not an immediate effort to consolidate all programs or philanthropy into a single system, it is worth the effort to consider how these could come together in the future.

4. Total cost of ownership

Even a great project can fail in the weeks or months that follow its launch. The reason a project fails often traces back to ineffectively planning for the support, maintenance or operations, and continuous development of the system. These long-term considerations should be taken into account as part of the total-cost-of-ownership (TCO) calculation beyond the one-time deployment and annual licensing.

When considering a platform, avoid limiting questions to immediate design and development costs. Ask prospective vendors how much is expected to maintain the system including release and upgrade management, data integrity, day-to-day administration or changes.  Specifically, we encourage questions surrounding the location of the support team (onshore or offshore), response times and hours of operation. Put this all to the test by asking for information about services and support resources beyond the sales team.

5. Analytics and outputs

Accurate, timely, and visually compelling reports are critical for demonstrating the impact of your organization. Ask the vendor for examples of reports generated by the solution, not vague descriptions. You know better than anyone that reporting can become extremely complicated very quickly, especially where government/CDFI or Metro2 credit reporting is concerned.

You need to understand what is happening inside your system as well as what information you need to extract for reporting purposes. It is crucial to identify which metrics are most important and whether they can be effectively communicated through the system in a visually compelling manner. When dealing with reporting and compliance, the outputs a system provides can be just as important as its other functionalities.

Summary + Conclusions

Choosing the right technology platform is a critical decision for any organization. With a surplus of solutions on the market, going through the selection process can feel overwhelming. The wrong decision can lead to a messy, not to mention expensive, process of switching solutions after months (or even a few short years) of struggle. Making the right choice the first time around saves time, energy, and resources. Asking the right questions surrounding flexibility, ease of use, borrower expectations, long-term maintenance costs, and reporting can ensure you make the right decision.