Banks have reason to pay closer attention, as the number of tax-exempt groups has risen steadily and now exceeds 1 million nationally.
The non-profit sector also has expanded in Arizona in scope and financial reach, growing from 13,057 organizations with $11.7 billion in assets in 1996 to 18,710 groups with $27 billion in assets last year, according to Arizona State University's Center for Nonprofit Leadership Management.
Some non-profit leaders say it is about time they started to see better service from banks.
"We've been turned down for loans because we don't fit the profiles of big commercial banks," said Connie Stover, executive director of the West Valley Art Museum in Surprise. "We aren't a business, so we don't show a profit, yet banks rely on profitability as a measure to repay loans."
She views the current challenges for her group and many other non-profits as considerable, citing cyclical revenue and reduced government support.
Bart Beauchamp, a vice president and relationship banker at National Bank of Arizona, said non-profits face the same challenges as for-profit firms yet operate on slimmer margins. "They need to make money like everyone else."
That somewhat-ironic reality has transformed the way some banks cater to non-profits in several key ways:
• More interest accounts and lower fees. Like consumers and regular businesses, non-profits need to watch banking costs.
"Some banks charge per deposit, per withdrawal or any number of fees," said Arlene Kulzer, president and CEO of Arrowhead Community Bank in Glendale. "You have to look at the per-item fees."
Non-profits also have to pay attention to their interest-bearing reserves to squeeze more revenue. "The days of passbook savings are gone," Kulzer said.
National Bank of Arizona, for example, has unveiled a suite of products featuring better interest-bearing accounts, fee waivers, more automated services, closing-cost discounts on loans, and personalized help. "The most important piece is having a dedicated relationship banker," Beauchamp said.
• More loan guidance. Many non-profits aren't regularly in the market for loans, but those with lending needs often require help making applications. In part, that means learning to run things like a for-profit company would.
"They have to understand we'll look at the same things we look at with any business," Kulzer said. "How will the funds be used? Is there collateral? What's the source of repayment?"
She considers it important for non-profits to have an executive director who understands the importance of cash flow, and she cautions leaders of small, fledgling non-profits that they might be asked to offer personal guarantees if they want to borrow funds for their groups. Non-profits in the market for loans should consider submitting applications at the high point of their cash-flow cycle, when things are at their best.
• More banker involvement. Non-profits with regular loan needs may want to find a banker to sit on their boards.
Bankers also can provide general networking help that can bear fruit in fundraising, operations and other areas.
"Bank A might charge higher fees than Bank B but also might have better connections to help your organization," Stover said. "It may be worth the extra fees to go with A because, in the long run, these connections may be more valuable."
Banks, in turn, see non-profit connections as an opportunity to market personal loans and deposit accounts to non-profit managers, staff and directors.
• New automated services. Many non-profits are benefiting from the same technology efficiencies that have helped businesses and consumers. For example, many banks now let non-profit customers deposit checks over the Internet using remote scanners.
"This allows us to make deposits daily," said Kathy Mills, chief financial officer for the Donor Network of Arizona, an organization that facilitates organ donations in the state.
Mills also appreciates an automatic sweep account for idle funds that National Bank of Arizona provides, along with the ability to check balances and more over the Internet. "Online banking saves a heck of a lot of time," she said.
• Greater attention to deposit-insurance limits. Like individuals and corporations, non-profits with hefty cash balances need to beware of keeping more than $100,000 at the same institution since FDIC insurance generally provides only that much coverage per account holder per bank.
For non-profits, including homeowner associations, this can be a concern. The banking industry is unusually healthy these days and failures rare, yet it still would be hard for non-profit managers to explain to directors, clients or donors about losing cash in this way.
To address that risk, Arrowhead and various other banks use CDARS, for Certificate of Deposit Account Registry Service, an option from Promontory Interfinancial Network that breaks big deposits into smaller accounts.
The money is placed with several banks in a formal network while keeping deposit insurance on the full sum.
"You can do everything through one bank rather than four or five banks," Kulzer said.
Plus, clients get a single Form 1099 tax statement showing interest income for the year.
The bottom line of these and other changes is that improved service from banks can make life easier for non-profits.
"We can help with the money management so they can concentrate on their mission," Beauchamp said.
