New models of private sector financing of not-for-profit corporations

States have taken several approaches to facilitate private sector investment in nonprofit corporations providing social services. These approaches include (a) fostering the creation of socially conscious, for-profit business entities that can fulfill a social purpose or invest resources in joint ventures with nonprofit corporations; (b) promoting private capital financing vehicles, such as social impact bonds, which incorporate incentives for enhanced return based upon the funded social program's attainment of specified measurable goals, and ( c) promoting public-private partnerships and joint ventures between private sector entity partners and nonprofit corporations to provide capital for investment in the nonprofit corporation's infrastructure and administration. New models of investment vehicles by for-profit financiers and social-purpose corporate entities are identified, meeting criteria for long-term sustainability of nonprofit corporation. These criteria include a long-term investment horizon required to maintain the investors' focus on infrastructure and administration; effective financial incentives for private investors; and consideration for the interests of all stakeholders, including program beneficiaries. To implement these new models, states such as New York State should adopt reforms that (a) encourage social purpose, for-profit corporations to enter into joint ventures with nonprofit corporations, (b) support and expand financing vehicles such as social impact bonds for private sector investment in a nonprofit corporation's infrastructure, administration and programs as well as enhanced funding based on identified success criteria; and (c) eliminate barriers for private sector joint ventures and public-private partnerships with nonprofit corporations.