Is Your Credit Union Banking Non-Profits?

I recently read a newspaper article about a local non-profit that is undertaking a $14 million project to redevelop a 100,000 square foot facility to carry out their mission of helping children and families in the area. It is an impressive project and will make the community a better place. Surprisingly, they are doing it all with special grants, donations and funding from the city. No banks or credit unions loaned money to the project. Could it have commenced sooner if that funding source was available? For me, this reinforces something I have explained to business lenders several times: non-profits are a good source of business loans too.

 When we think of a non-profit, you might have an archaic vision in your head of what sustains these organizations. You may think of them as small operations heavily dependent on the charity of others. You may also think they are run by poorly paid people, who chose to take up that work because they are extremely mission-oriented. I would say that is hardly typical of a non-profit in the twenty-first century, and we all need to open our minds a bit more.

 Non-profits can largely do anything a for-profit business can do. Sure, just like some small businesses struggle and barely make it, that too can be the case with small non-profits. But other businesses flourish, scale-up and have billions of dollars at their disposal. There are non-profits like this too. The Bill and Melinda Gates Foundation has an endowment of $44 billion. The John D. and Catherine T. MacArthur Foundation has a $6 billion endowment. You are thinking these are exceptions, and local non-profits hardly have these resources, right? The John T. Vucurevich Foundation, based right here in Rapid City, has a net worth greater than $100 million and the South Dakota Wheat Growers Cooperative, based in Aberdeen, has $247 million in equity. Even local non-profits can be heavy hitters.

 Of course, you don’t need to look any further than your own credit union to make this very point. A credit union can provide banking services, and yet they do it all as a non-profit. And how big is your credit union? $25 million in total assets? $100 million? $1 billion in total assets? Non-profits like our credit unions have grown to become powerful organizations in our community. And that means they have large organizational needs too. They need to purchase capital assets, they need to buy buildings, and they need lines of credit. Just like any for-profit organization that would like to preserve their cash, non-profits may also prefer to borrow for some of their needs.

  I want to believe that credit unions should also have the inside track when it comes to lending to non-profits. When a credit union helps a non-profit, it is really a non-profit helping another non-profit. We know that successful lending sometimes means exploiting a niche or presenting a compelling story of why to work with you. I think credit unions providing MBLs to non-profits competes in both of these areas. Unless you have local banks trying to corner all the non-profit MBL transactions locally, I think credit unions could be doing much more to take advantage of these opportunities.