I was thinking about banking today, and how far we've come in nonprofits in relation to our banks. I well remember when I was board president of a large ($12,000,000 annually at the time) human services nonprofit here in Springfield 20 years ago, and we went to the our bank for a $75,000 line of credit (which is almost nothing in terms of cash flow) and the three old line banks in town shared the "risk" for that loan because we were, well, nonprofit....I discovered that the banks did all of their nonprofit loaning in a pool to reduce risk....incredible to think of today.
Progress aside, there are things to remember when selecting a bank, or even your every five year review of the best bank for your organization. Here's my list:
1. You are the customer. If you are borrowing, the bank is selling you money. Banks want your deposits--that's the money they use to make loans with. So never walk into a bank and say "We're a poor wonderful charity, can we please open account in your nice bank?" Instead, say, we're a $750,000 a year (or whatever) small nonprofit business and we're looking for a bank that's a good fit for our deposit, transaction, and loan needs."
2. Never borrow unless you are making money. This is because debt is paid back from profits, not losses, nor from "breaking even" on your income and expense statement. Don't believe me? Ask you accountant. If you have a financial need for a program that is or is going to make money, debt is good. If not, stay away....the one exception to this is a line of credit for short term cash flow issues.
3. Ask lots of questions about services and fees. Often there are fees that are not hidden, just never discussed. Check fees, online transaction fees, etc. TIP: NEVER pay for online transaction fees, bill paying, inter-account transfers....there is far too much competition in this area.
What will the bank want to know? A lot. They'll ask about your audit, your area of service, your governance, if you have conflict of interest statements, how you budget, etc. You want to impress them with your management skills, and not wear your cause on your sleeve.
Your relationship with your banker is crucial. Choose wisely, review regularly and meet with your banker twice a year. It's worth the time.