The funding landscape for nonprofits has undergone a seismic shift. Earlier this year, the federal government—historically the second-largest funder of nonprofits in the United States, after income from program fees—ordered a blanket federal funding freeze, putting over $300 billion in annual funding for nonprofits at risk. This action sent shockwaves through organizations nationwide, with many forced to furlough staff, cancel essential services, and scramble to find alternative funding sources.

Even after courts blocked the freeze, uncertainty remains, with some organizations still unable to access their funding and others now fearful of future cuts. An unstable political and economic environment has upended many private sector philanthropic commitments as well.

This crisis has laid bare what nonprofit leaders have known for years: Today’s model for funding nonprofits and social enterprises is fundamentally broken. Despite a growing movement toward trust-based philanthropy, the majority of foundations continue to provide grants that are project-specific and time-limited. This short-term approach forces nonprofit leaders to divert attention from their core missions, spending precious time and resources chasing restricted funding streams rather than pursuing long-term systemic change.

There is a better path forward, one we call “enterprise capital.” This means providing funding with the purpose of investing in the capacity of nonprofits to invest in their own enterprises. In other words, supporting nonprofits to develop lasting and sustainable business models.

What Is Enterprise Capital?

Simply put, by enterprise capital, we mean unrestricted, upfront, multiyear funding that increases the net assets on a nonprofit’s balance sheet. This is often combined with financial technical assistance, with the goal of supporting nonprofit investments in systems and capacity, with lasting effects.

Unlike operational grants, which typically support current programs and administrative needs, enterprise capital is funding that is focused specifically on helping nonprofits build the organizational infrastructure to engage in long-term, high-impact, systems-change work, while growing financial resilience.

Read the full article about enterprise capital for nonprofits by Alexandra Sing and Andrea Levere at Nonprofit Quarterly.