Nonprofits can be good business for banks, and nonprofits, in turn, can benefit from having a primary relationship with a bank. Citizens Bank (www.citizensbank.com) has created a special division to provide services especially for the nonprofit sector. But the bank has gone beyond a strictly business relationship, encouraging its employees to be active volunteers in community nonprofits and providing nonprofits with grants to fund events and monetary contributions in support of events.

Irene Hannan, vice president, nonprofit banking, Citizens Bank, explains her bank’s philosophy about nonprofits. “We are putting ourselves on the line,” says Hannan. “We want to understand not only their business, but also their mission.” Hannan doesn’t just send a check, but personally takes it to her nonprofits. “We’re there to help foster their mission and add value to their organization.”

Hannan and her colleague, Max Tabak, business banking officer at Citizens, join Nancy Kieling, president and executive director of the Princeton Area Community Foundation, and Duke Fanelli of AXA Equitable in addressing the New Jersey Bankers Association on “Marketing to Non-Profits” on Thursday, March 2, at 8:30 a.m. at the Woodbridge Hilton. Cost: $60. Register online at www.njbankers.com or call 609-520-1221.

Kieling offers suggestions to banks that want business from nonprofits like the one she heads:

Be aware that there are many types of nonprofits. Nonprofits range from small mom and pop ventures to hospitals, universities, independent schools, and cultural organizations. Banks need to segment, to use different marketing strategies for different types of nonprofits, just as they do in the profit world.

Citizens has segmented its nonprofit market according to budget size, with Hannan handling nonprofits with budgets over $10 million and Tabak working with the under-$10 million segment. Although Citizens does some marketing, Hannan says that nonprofit customers are almost there for the asking. “In one way, the market finds you,” she says. “Nonprofits have an appetite for credit, and they are in the marketplace looking for ways to finance projects, particularly capital ones.”

Understand that representatives of nonprofits differ from those at for-profit companies. Depending on the size of the nonprofit, banks will be conferring with people in different roles, ranging from a board member or even a volunteer for a smaller nonprofit, to an executive director at one of medium size, to the finance department of big nonprofits.

Do due diligence on nonprofits as you would on businesses. Hannan says there are no red flags that banks look for, other than profitability, or positive change in net assets. Kieling adds that banks should examine the tax returns of nonprofits, which can be found at guidestar.org. For information on both corporate and nonprofit foundations, bankers can go to www.fdncenter.org.

Be involved in your community. Nonprofits often choose banks based on how active and generous they are to local causes. Tabak has worked for other banks, but likes Citizens’ focus on community involvement, as expressed in its credo — “Customers, Colleagues, and Community.” He explains that “we want to give back. This differentiates us from the market.”

Tabak is treasurer of the Mazzoni Center, which does health education in the minority community, and he volunteers there once or twice a month. He also volunteers for the Clean Air Council of the Delaware Valley. Hannan volunteers for the Urban League, Girl Scouts, boards of nonprofit schools, and civic organizations, and she does leadership development for the United Way and the Heart Association.

Citizens Bank also has a sabbatical program designed for employees who want to go work with a nonprofit. The bank will provide a full paycheck for up to six months. Another bank program, Champions in Action, is done in partnership with television station NBC 10. Through this program the bank gives $25,000 to an organization quarterly, NBC 10 provides the publicity, and Citizens’ volunteers go in to work with the organization.

Develop a full relationship with nonprofits. “We want to be their consultative partner and their trusted advisor, offering the full range of products and services,” says Hannan. Although the bank has to be careful not to cross the line into roles that a financial advisor would play — bringing together all the people who will be party to new financing — it does share best practices and connects customers to like concerns.

Create services especially for nonprofits. Because Citizens has specific expertise in handling the unique banking needs of nonprofits, says Hannan, “there is no ramp-up time for us to understand an organization. It is a value to our customers to not take their time to educate their banker.”

The nonprofit department at Citizens is organized around relationship managers, who, according to Hannan, “act as the quarterback and know the customer best.” These managers bring in the expertise necessary from other bank departments to understand nonprofits and provide the services they need.

These services commonly include “fund accounting,” a system that is different than that many for-profits use. Banks are also called upon to deal with capital campaigns, which involves receiving pledges and making loans against them. Banks typically offer nonprofits a capital campaign pledge line of credit.

Another popular service is foreign exchange. Many colleges and universities, for example, are paying faculty and overseas campuses and need to be able to hedge and lock in changes in currency rates.

For smaller nonprofits, which are watching every penny, says Tabak, the bank may also offer interest-bearing accounts that require no fees.

Help with equipment leasing. When a nonprofit needs big ticket items like a new phone or computer system, or a medical facility needs new medical devices, it is often in its best interest to lease instead of paying cash. This keeps the expense off the nonprofit’s balance sheet and allows it to update equipment regularly. The bank would give the nonprofit the money to pay the manufacturer and then set up a lease to be paid over a number of years.

Kieling earned a bachelor’s degree in history from the University of Wisconsin and later a master’s in education from Old Dominion University. She has worked as regional director of admissions for Princeton University, corporate lending officer in the communications, entertainment and publishing division of the Bank of New York, and has been at PACF for 12 years. During Kieling’s tenure, PACF has grown from $300,000 in assets to over $40 million. Kieling serves as chair of the board of the Council of New Jersey Grantmakers, and as a trustee of the Princeton Regional Chamber of Commerce.

Hannan graduated from Trinity College and pursued graduate studies at Temple University and the University of Wisconsin. Before she came to Citizens, she was the director of women’s business services for the General Bank of Wachovia.

Kieling’s final suggestion to banks seeking nonprofit business is that they need to understand that nonprofits have a big economic presence, accounting for approximately 10 percent of the area’s workforce. Tabak adds that many people “have the misleading thought that nonprofits are not real businesses, which is a wrong perception. They are businesses just like any manufacturing company, and they have to show a profit.”

Or, as Hannan quips: “No mission without margin.”

With 25,000 nonprofits in New Jersey alone, it is time for banks to take full advantage of the business possibilities represented by $59 billion in assets, $41 billion in yearly income, and $26 billion in expenses. Citizens Bank is already reaping the rewards, and its model for doing business with nonprofits serves not only its own business needs, but the social, cultural, educational, religious, civic, and health needs of its community.

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