Program-Related Investments

An Overview of Grant Alternatives

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:

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

PRIs are not subject to the normal prudent investment standards. For legal purposes, PRIs are considered to be more akin to grants because they are made primarily to further a charitable purpose without concern for return on investments. For this reason, PRIs do not have to be prudent, and they are not subject to an excise tax for jeopardizing investments. To qualify as a PRI and not a jeopardizing investment, the foundation must satisfy three requirements laid out by the IRS:

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