ECCU Blog

Having been a banker for more years than I like to admit, I have seen my share of changes in the financial world. There have been more in the past ten years than ever before. The reason? Technology.

Technology and ECCU’s ability to harness it has brought about some incredible efficiencies we never would have thought possible. Today, for example, you can make a deposit directly to your ministry’s ECCU account without leaving the comfort of your office—even if your office is in another state! With our Remote Deposit Capture (RDC) service, all you need to do is run donor checks through a scanner, connect to a secure site on the Internet, and make your deposit. Not only does this improve your ministry’s cash flow, it also eliminates your need to go to the bank, photocopy checks, and fill out detailed deposit slips. RDC can even integrate the information with your donor system. All this means less time spent on banking and more on ministry.

Technology does more than help ministries like yours run more smoothly and efficiently. It can also enable them to grow in ways they may not have before. Another example…

One of our radio ministry members had no trouble attracting listeners to their website. They did, however, have trouble enlisting new donors. The problem was the process prospective donors had to go through to set up online giving. Once they got to the ministry’s website, they had to download, print, fill out, and mail back a form. ECCU’s web ACH service changed that process. Now people can sign up online, and the ministry can debit their account through a web ACH transaction to receive their contributions without waiting. The first month the ministry used this technology, they added 14 new donors. Pretty great compared to their previous growth rate of one new donor per month.

It’s technological advances like web ACH and Remote Deposit Capture that allow ECCU to help ministries focus and grow in ways we never could have imagined. For us, technology is constantly improving the way we partner with our members.

Are you aware of other technology that could help us serve you more effectively?

As a church treasurer, I often find myself immersed in tax and legal issues that affect church finances. When I came across this one, I thought I’d better give our readers a quick update.

One response to economic changes of the past few years has been increased concern at some ministries about the safety of their deposits. Increasing the federal deposit insurance limit to $250,000 helped ease some of that concern. Recently passed legislation may ease that tension a bit more.

Effective with the July 21, 2010 signing of the Dodd – Frank Act (or the “financial reform bill” as it’s more commonly known), non-interest-bearing credit union accounts now have unlimited insurance. That’s right…unlimited insurance. For ECCU members, this insurance coverage, which is provided by the National Credit Union Administration (NCUA), applies to any analyzed checking accounts. Coverage will be in place until January 1, 2013, unless extended by Congress.

Here are just two of many implications of this change:

• If your ministry maintains your operating accounts with ECCU as analyzed checking accounts, all the funds in those accounts will be insured. (This coverage is in addition to the $250,000 deposit insurance already available for other accounts.)
• By utilizing our Ministry Bonus Sweep Account, you can maximize return of excess funds while keeping checking balances separately insured.

We’ll be giving you more details about this legislation and how it can benefit your ministry on our website, but I wanted to give you the opportunity to be thinking about it now.

“When will the church and ministry lending market return to normal?”

That’s one of the most common questions we heard at the recent NACBA conference in Orlando. Some ministry leaders are concerned about finding financing for their next project. Others are wondering whether they’ll be able to renew their existing loans.

These are important questions. The lending landscape has forever changed. At one time, ministries had a wealth of options when looking for a loan. Churches could count on attendance growth and increased giving to fund expansion. Ministries could get loans without having substantial cash reserves. And they expected that their lender could meet all of their current and future financing needs.

Lenders have been forced to become more conservative when considering loan requests. But some important things remain unchanged for ministries that need financing, like the four Cs:

Character—the payment history, leadership skills, and experience of the ministry team
Capacity—the ability to make loan payments out of current operational cash flow
Collateral—the asset used to secure the loan
Cash—the amount of reserves available to cover a temporary decline in giving

While the principles remain the same, the interpretation of them has shifted slightly. When lenders consider the character of a borrower, they’re not analyzing how firm the borrower’s handshake is or whether he or she looks them in the eye. What are they looking for? Proven management. They’re asking, “How has this leadership team managed their ministry in today’s market? What about before the economy changed so dramatically?”

Capacity to make loan payments used to be measured on a one-to-one basis—$1 of net income after expenses (excluding loan payments) for every $1 of loan payments. Now most lenders want $1.25 or more of net income per $1 of payments. What’s it mean? The loan amount a ministry qualifies for today could be much lower than it was a couple years ago.

As for collateral, lenders used to be comfortable approving loans with a 70% loan-to-value ratio (in some cases even higher). As commercial property values decline, lenders are increasingly reluctant to approve loan-to-value ratios over 60%. That means a ministry may qualify for financing, but it will also need to bring more cash to the table than in previous years.

Speaking of cash, it used to be an afterthought. But today, lenders will scrutinize cash reserves. Cash is a key indicator of a ministry’s ability to manage through the ups and downs of the economy.

The end result is that ministries need to plan ahead when considering future financing or an upcoming refinance. One way to plan ahead is to have one of our ministry development officers walk you through our Borrower Health Assessment, which helps ministries determine how a financial institution will view their ministry.

What experience has your ministry had when dealing with financial institutions lately?