Program-Related Investments Overview

When we think of a private foundation supporting a charitable cause, most of us think in terms of grants—money given away with no expectation of it ever coming back. But loans, loan guarantees, and even equity investments can be made by foundations when supporting a charitable purpose. These financial vehicles, called Program-Related Investments (PRIs), offer foundations an alternative beyond traditional grantmaking. Whereas grant dollars go out the door never to return, PRI dollars are generally recovered in part or in whole, and may even earn some return for the foundation in the form of interest or appreciation. PRIs offer several important advantages, including:

PRI dollars are generally recovered in part or in whole, and may even earn some return for the foundation.

• The ability to comfortably give more funds to a worthy project than through a grant, knowing that the principal will eventually be repaid to the foundation.
• The ability to reuse or “recycle” the same dollars for the benefit of multiple organizations, as PRIs are paid back and then redistributed.
• Qualification toward the foundation’s 5% payout requirement in the year of disbursement, just like a traditional grant.
• Reduction in the foundation’s asset base (on which the minimum distribution rate is calculated) for the term of a PRI loan.
• The ability to invest capital from the grantmaking budget in commercial opportunities that align with the foundation’s mission but otherwise would not merit a permissible business investment of endowment funds.
• The ability to meet payout requirements in a time of high asset growth while sheltering loaned funds from subsequent asset depreciation.

Meanwhile, recipients of PRIs benefit in several ways as well. Recipients can: