Banks leave nonprofit lending market untapped, fintech CEO says

Dominic Kalms, CEO of fintech marketplace B Generous, highlights a significant gap in the financial market where only 3% of banks currently lend to the nonprofit sector despite its $14 trillion in assets. While the sector generates $4 trillion in annual revenue and maintains a consistent net income surplus, many lenders overlook these organizations due to misconceptions about their reliance on donations. This untapped $1 trillion lending opportunity represents a critical frontier for nonprofits seeking capital to scale their social impact through earned income and asset-backed financing.

B Generous has facilitated $100 million in loans over the past two years, addressing a massive disconnect between traditional banking and the nonprofit sector. Dominic Kalms, founder of the marketplace, argues that the term "nonprofit" is a misnomer that obscures the financial health of organizations that generated a $204 billion net income surplus in 2024 alone. Contrary to common belief, less than 8% of nonprofit revenue comes from donations, while 81% is derived from earned income, mirroring traditional business models. Despite this stability, Kalms notes that there is currently $1 trillion in untapped lending capacity because most banks fail to recognize the sector as a viable vertical.

To bridge this gap, B Generous utilizes a proprietary AI-driven credit algorithm called SmartScore, which was developed using data from nearly 2 million nonprofits and 950 million data points. The model boasts a 97% historical accuracy in predicting loan defaults, significantly outperforming traditional commercial lending models. This technology allows lenders like California Business Bank and Grays Peak Capital to source and vet deals more efficiently. Tom Meyer, CEO of California Business Bank, noted that the platform acts as a business development arm, providing pre-screened opportunities that lead to long-term relationships and connections with influential community board members.

The investment community is also showing increased interest through specialized vehicles like Grays Peak Capital’s Impact Credit Fund, which focuses exclusively on nonprofit lending. Scott Stevens of Grays Peak Capital emphasized that nonprofits are strong candidates for credit because they often hold marketable securities and real estate assets. This shift toward impact investing allows lenders to achieve market-rate yields while quantifying social outcomes. As the sector continues to hold vast assets and generate substantial revenue, the expansion of the nonprofit lending market offers a path for organizations to move beyond donation-based funding and secure the capital necessary for long-term sustainability.