Banking and Finance

Keeping nonprofits afloat

By Dale W. Hlaves

Susan Holcomb
Vice president
Wells Fargo Bank

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As the national economy sinks deeper into a recession, experts say that it will continue to get worse before it starts to get better. Due to the recession, companies across the country continue to cut jobs in an effort to control costs.

With less people working and generating a disposable income, how can businesses that rely on the donations from others keep their head above water?

“Historically, nonprofits have relied primarily on private and corporate donors to raise money,” says Susan Holcomb, vice president for Wells Fargo Bank in Houston. “It’s no secret that our economy has reached an economic low of recessionary proportion.”

Smart Business asked Holcomb how the recession has affected nonprofit organizations, including churches, and their ability to raise money.

How has the economic downturn affected nonprofits’ ability to raise money?

Many corporations have had to trim their budgets to keep their doors open and don’t have the large philanthropic budgets to contribute at the same generous level as they have in the past. The amount of revenue available every year is uncertain for most nonprofits. Unlike most for-profits, nonprofits don’t depend on product sales, relying instead on the generosity of contributors. Even nonprofits with large endowment funds have uncertain revenue because their investment income depends on the state of the financial markets.

Charitable contributions typically shrink in more difficult economic times. In recent years, the level of charitable donations was impacted by the stock market and other investments. During difficult economic periods, the stream of small donations at many charities is unaffected, but big donors give less. As a result, nonprofits are having to watch every penny they generate and pay closer attention to all expense line items. Now more than ever, nonprofits must be even more prudent and fiscally responsible if they are going to be able to continue to provide services to the communities in which they serve. Nonprofits today must be creative and create multiple revenue streams if they are going to survive.

Do churches have an easier time raising money?

The religious community may have a little easier time raising money, but it’s still not that easy. An advantage a church might have over some nonprofits is that a church traditionally relies on the faith of its members to tithe to the church and its ministries to sustain its existence. Although attendance and membership dynamics vary significantly for different churches and regions, older Americans are more likely to be regular church members and contributors. Faith-based organizations, predominantly churches, are seeing an increase in the number of giving units, which makes up in part for the decrease in the giving by the individual donor. The tragedy, however, is that many churches are having to lay off employees in the same way that many corporations have had to due to a sluggish economy.

Another advantage a church may have is that it can create subsidiary nonprofits and a community development corporation to help create multiple revenue streams.

Are there different tactics used to raise money in today’s economy?

Internet fundraising has gone from being a luxury to an everyday necessity for nonprofit fundraising. We all saw how Internet fundraising helped President Obama raise enough capital to win the presidency. This shift is especially effective among the demographic change to a younger giving base. Also, this method of fundraising is crucial to reaching a mass audience. Of course, there are still the traditional methods of fundraising that will always be around, such as the written letter request, the phone call and/or a face-to-face meeting.

What is a bank’s role concerning nonprofits and churches?

The bank’s role concerning nonprofits would be to first understand the DNA/personality of the nonprofit. The banker must take the time to understand the nonprofit’s mission, objectives, balance sheet, funding sources and funding cycles. The same applies to churches. Our job is to make sure that when providing products, services or credit, that it’s a win-win situation for the bank and the nonprofit. If we don’t take the time to ask the right questions and to do our due diligence, then we are not doing our job and don’t deserve the business. At Wells Fargo, we have a specialized team of bankers with many years of experience with working in our communities and with our churches and nonprofits.

Wells Fargo senior management also encourages each of its team members to support the respective markets they serve through charitable monetary giving, time and talent via volunteer hours.

SUSAN HOLCOMB is a vice president at Wells Fargo Bank. Reach her at (713) 284-5477 or susan.holcomb@wellsfargo.com.