Program related investments (PRIs) are loans or other investments made by a foundation to support its charitable purpose. PRIs count toward a foundation’s distribution requirement as long as they meet a few basic requirements, and the best part is that the funds generally are returned to the foundation to be used for other PRIs or for grants.
How does a PRI work? In a simple example, the Jones Foundation makes a $50,000 deposit in a community loan fund that finances affordable housing. The loan fund offers to pay the foundation 2% interest over a 12-month period. The foundation immediately earns credit of the entire investment amount toward its 5% distribution requirement, even though it can ask the loan fund to return $51,000 to the foundation at the end of the year.
PRIs can take many forms: a below-market rate, federally insured deposit in development bank, a loan to a nonprofit to launch a new program, a bridge loan until a nonprofit receives its delayed contract payment, or even an equity investment in a community development venture capital fund. Some loan guarantees and asset purchases also can be classified as PRIs.
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