Are You Partnering With Your Financial Institution?
By: Tim Lawrence
For the typical ministry, there are several partnerships that need to be cultivated for long-term success.
A church, for example, must partner with their congregants to cultivate their spiritual growth. They must partner with their employees to realize their vision. They must also partner with their community to see that charitable and spiritual needs of those in the neighborhood are being met.
It makes sense, then, that the church should partner with their financial institution in achieving their financial goals.
What typically happens, though, is that the relationship between the church and financial institution is one of consumer and commodity provider, with an understanding that the bank or credit union’s goals are diametrically opposed.
This is understandable because, intuitively, it makes sense – the financial institution typically wants to maximize the difference between the rates they pay on deposits and the rates they collect on loans, and the church wants the opposite. So, the negotiation dance begins, with each side trying to get the best rates to steward their resources as prudently as possible.
There is nothing wrong with this process, but what happens is that the products that the financial institution provides become a commodity driven by price. This can serve the church well from a price standpoint, but it can also stifle the creativeness that comes with a broad, strategically based relationship and true partnership.
A financial institution can be much more than provider of financial products. If chosen wisely, it can be financial consultant, as well. At our credit union, each of the ministry development officers have years of experience working with churches that they can bring to bear on financial issues that the church may have.
For example, if a church is experiencing a cash flow shortage in the summer months, then there is a very good chance that the development officer has already worked with churches with the same issues and may have valuable insights that can be shared to help them through the difficult time. The officer may also be able to represent the church’s point of view to the institution’s management with greater effectiveness, pointing to successful outcomes with similar issues with other relationships.
Second, with a strategic relationship, the ministry can tap into the financial institution’s often expansive financial and strategic network.
A recent example for the credit union occurred when a mid-sized church decided to “re-invent” the way they would operate. They transitioned from a traditional Sunday walk-up service model to a home church based model. The church was very excited except for one problem – what to do with the 50,000-square-foot church building that, in essence, was no longer needed, but had a significant loan attached to it?
Because the credit union had multiple contacts with commercial real estate brokers and leasing agents, the church was able to partner with one of these professionals to work quickly out a lease and purchase strategy, create a plan to ultimately pull their equity of the large building, pay off the loan, and buy a more appropriately sized building free of any loans. And, the credit union had an opportunity to partner with the buyer of the building in a loan relationship that is appropriate for the size of the building and lower their risk going forward. It ended in a win-win proposition.
Third, there are times when shared goals emerge that can benefit the ministry as well as the financial institution.
A good example of this is the construction loan process. For a lender, the biggest risk to the construction loan is that the construction project has the potential to spiral out of control from a cost standpoint and fail to be completed when the loan funds are depleted. What is the biggest risk to the ministry? The same risk. Therefore, the ministry’s goal and the financial institution’s goal are one and the same – the timely completion of a project, within budget.
A construction lender will typically put in several conditions into the loan agreement that will mitigate these risks, such as requirements for cash contingency, retainage, and payment and performance bonds. Although these requirements are often met with opposition from the ministry because they can result in increased upfront cash requirements, it is important to note that the opposition often originates from parties who have goals that are opposed to the ministries goals (the contractor).
It is wise to investigate exactly why a construction lender requires these items that mitigate the risk, because the lender might just be protecting the ministry in the process of protecting themselves. What happens often at the credit union in these cases is that the ministry will choose to value-engineer the project, lowering the hard costs of the project, and end up with a more cost-efficient project that is also better protected from construction risk.
Finally, strategic relationships can progress to the point where new synergies emerge. For example, a large missionary organization was looking for ways to expand their income sources, while the credit union was looking for like-minded organizations for charitable donations.
Out of those two needs an Affinity Credit Card was created, with the missionary organization’s logo placed on the credit card, and the credit union donating a portion of the transaction fees to the organization. The card not only resulted in ongoing donations from the credit union, but led to increased excitement and commitment to the missionary organization among credit union members, which, in turn, led to an expansion of the organization’s donor base.
It is always a good time to examine your business to business relationships, including the one with your financial institution. Look for opportunities to strategically partner with them.
Do they understand and can they bring expertise to bear for the issues that you face? Do they understand your vision for your organization’s future? Can you leverage their network to bring value to the relationship? Are there any shared goals? Are there synergistic opportunities?
Improving the partnership in these areas is bound enhance your church’s success.
Tim Lawrence is vice president, Ministry Development Group, Sales for Christian Community Credit Union, www.myCCCU.com.