Program-related investments (PRIs) are loans or other investments made by a foundation to support its charitable purpose. They count toward a foundation’s distribution requirement as long as they meet specific criteria. The key advantage? The funds are typically returned to the foundation, allowing them to be reinvested in future PRIs or grants.
How does a PRI work?
Here’s a simple example: The Jones Foundation deposits $50,000 into a community loan fund that finances affordable housing. The loan fund agrees to pay the foundation 2% interest over 12 months. Even though the foundation can request the return of $51,000 at the end of the year, it immediately receives full credit for the $50,000 toward its 5% distribution requirement.
PRIs can take various forms, including:
- A below-market-rate, federally insured deposit in a development bank
- A loan to a nonprofit to launch a new program
- A bridge loan for a nonprofit awaiting a delayed contract payment
- An equity investment in a community development venture capital fund
- Certain loan guarantees or asset purchases
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