Warning, this article COMPLETELY buries the lead on the real reason why donate now, pay later could be a game-changer.
So just scroll down to the last paragraph now and we’ll just endure the scorn of every writing teacher ever.
There’s a big difference between making a pledge and making a donation. A pledge is when you promise to give a certain amount of money to a cause, usually over time. A donation, on the other hand, is a one-time gift. To put it simply: does the money leave a donor’s wallet now or later and does that money end up in a nonprofit bank account now or later.
Most importantly, pledges can be broken. If you make a pledge to give $100 to your favorite charity, but then find yourself in tough financial times, you can always back out of that pledge. There’s no legal obligation to uphold your end of the bargain. On the other hand, once you make a donation, it’s final. The charity will receive your money and you won’t be able to get it back.
So why would anyone make a pledge instead of just donating the money right away? For some people, it’s simply a matter of convenience. If you’re not sure you’ll have the money available when the charity needs it, pledging allows you to spread out your payments over time.
Another reason people make pledges is that they want to show their support for the cause without necessarily having the means to donate right away. For example, if someone knows they’re going to get a raise in six months, they may want to make a pledge now and pay it off later when they have more disposable income.
So let’s talk about how to get those bags of money now vs later 🙂
Pledge Now, Pay Later Tools
Technically this can be done with common pledge forms on or offline. Commonly these are used during dinner fundraisers, where attendees can pledge to give an amount in the room and be celebrated in the moment.
There are questions on how long is typical to give for fulfilling pledges, ideally it should at least be within the fiscal year of the nonprofit. The other risk is whether the donor ends up giving. According to Planning for Pledge Attrition – The Curtis Group, general accountants writedown these pledges by 8-10%, but their experience is that only 2% of pledges are lost.
There is tech that can turn pledges into monthly payments to make collecting pledges easier.
Description: New tools from organizations like CauseVox (Nonprofit Fundraising Website, CauseVox, Launches Pledge Now, Pay Later Functionality), have introduced the feature of Pledge Now, Pay Later (™). They streamline how pledges can be scheduled out into payments that are deducted automatically. However, this is still a payment spread over time that the donor pays to the nonprofit.
Donate Now, Pay Later Tools
There is a lot more financial engineering needed to create the loan and insurance systems necessary to pass along the full donation to nonprofits upfront. Companies that deal with online sales turn to popular tools like Affirm (Affirm for merchants: offer customer financing and buy now pay later options for your business), the question is who can nonprofits turn to?
Description: Allows nonprofits to add a Donate Now, Pay Later(™) widget to their website. The tool offers donors the ability to make a full donation that the nonprofit immediately gets. The donor then can pay off that donation, interest free over the following months.
Their system doesn’t impact credit score, and there are nonpredatory reconciliation paths if donors aren’t able to pay due to hardship.
Description: Donate immediately and then the donor is given four months of interest free time to make payments.
Why Donate now, pay later is exciting
Fundraising teams will need to think carefully about how they promote these options vs things like monthly giving. Monthly giving runs into common problems with credit cards that expire, though this tech is improving, there is still attrition to factor in.
Donate now, pay later should probably be done in addition to, NOT instead of existing donation strategies that are working.
The biggest opportunity that donate now, pay later options provide come in the way tax-deductible charitable contributions work. Imagine the case where a donor wants to make a large, tax-deductible donation in December but they don’t have the liquidity because of rich people stuff. By using donate now, pay later they can make that full donation in December and then pay for it in the following tax year when they have more liquidity (money to spend).
This one little trick might huge for nonprofits unlocking increased giving during the holiday season.