Nonprofit leaders are rethinking how they structure capital as they search for more sustainable ways to finance mission-driven work and navigate growing complexity in the policy and funding landscape.
Panelists in a recent webinar hosted by Venable discussed how many organizations are moving beyond project-based grants to pursue long-term, flexible capital that better matches their ambitions. Moderator and Venable partner George Constantine noted that “many nonprofits are continuing to look for ways to make a real impact in pursuit of their missions” and are increasingly considering less traditional approaches to grantmaking and project funding.
Callie Riley, managing director at Cambiar Education, explained that her team is designing tools to address what she calls “the messy middle of funding,” where organizations have outgrown early seed grants but cannot yet access favorable debt or long-term growth capital. To close that gap, Riley said, Cambiar has created a blended model that combines operating grants, low-interest term loans, recoverable loans, and convertible grants aimed at supporting growth, innovation, and evidence-building over many years.
Impact-First Financing and the “Messy Middle”
Riley emphasized that curriculum-focused nonprofits in particular face extensive production processes, long state adoption cycles and must compete with large for-profit publishers while trying to keep their materials research-based and responsive to student needs.
She described Cambiar’s fund as “impact-first,” with a goal of helping portfolio organizations collectively reach at least 20 million students with high-quality curriculum, while also moving them toward 80% to 90% earned revenue, so that they are less reliant on philanthropy. Riley said early conversations with nonprofits revealed that leaders are open to creative vehicles such as recoverable and convertible grants when those tools are paired with long-term partnership and intensive strategic support.
“We’re trying to address the messy middle between grants and traditional debt of nonprofit financing,” Riley said, “especially for product-focused organizations in those critical growth stages.”
Legal Guardrails for Mission-Driven Investments
Venable partner Yosef Ziffer outlined the tax and fiduciary framework that underpins these innovative instruments, describing a spectrum that runs “from outright charitable grants” on one end to traditional investments on the other, with impact-focused structures in between. He pointed to program-related investments, or PRIs, as a key model: transactions where the “primary purpose of the investment is to accomplish one or more charitable outcomes” and any financial return is clearly secondary.
Ziffer noted that private foundations may treat qualifying PRIs much like grants for tax purposes, and public charities often use the same standards to evaluate mission-related deals with non-charitable entities. At the same time, he warned that funders must scrutinize private benefit, unrelated business income, and the overall risk profile, emphasizing that “there is no significant purpose of income production or asset appreciation” when a transaction is properly characterized as a PRI.
PRI Compliance and Charitable Investment Standards
Building on that framework, Ziffer explained that organizations must also consider the “but for” test when assessing whether an investment’s primary purpose is charitable. He noted that the inquiry turns on whether an organization “would not have made this expenditure, would not have made this investment, but for the relationship between the investment and the charitable outcome that is sought to be achieved.”
This analysis, he said, becomes especially important as charities explore models that blend mission and financial return, because funders must determine whether the activity advances a public benefit significant enough to outweigh any incidental private advantages. Ziffer emphasized that “the private benefit should always be insubstantial relative to the amount of public benefit,” a threshold that demands careful, situation-specific review.
He added that evaluating PRIs and related tools requires funders to examine whether the investment would appeal to a profit-motivated investor, since the closer it aligns with conventional financial expectations, “the less likely that something is going to qualify as a PRI.”
In practice, this means analyzing factors such as expected returns, risk profiles, and repayment schedules, he said, while also recognizing that below-market terms—like those used in Cambiar’s model—can strengthen the charitable rationale. Ziffer also connected the PRI standards to broader organizational responsibilities, noting that decisions about how to deploy assets ultimately implicate fiduciary duties and must align with governing documents, donor expectations, and regulatory oversight.
Watch the full webinar here to learn more. If you or your organization have questions about alternatives to traditional grantmaking, contact the presenters or visit Venable.com to learn more about our Nonprofit Organizations Group.