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Best Banks for Nonprofits

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The best banks for nonprofit organizations offer a free or low-fee business checking account, access to credit and ample online tools that help streamline your operations. We scoured our top-rated business accounts to find those with features and services tailored to nonprofit organizations.

LendingClub: Best online bank for nonprofits

LendingClub is a top-rated online bank that offers traditional business solutions with a few added perks. The bank’s Tailored Business Checking account, for example, offers unlimited ATM fee rebates and 1% cash back on some debit card purchases.

at LendingClub Bank, Member FDIC

Business checking

  • $10 monthly fee, waived with an average monthly balance of $5,000 or more.

  • Unlimited fee-free transactions and cash deposits (through ATM).

  • Free ATM access worldwide. Unlimited rebates for fees charged by other banks when you use their ATMs.

  • Account earns 0.10% annual percentage yield on balances of $5,000 and higher.

  • Unlimited 1% cash back on online and signature-based credit transactions made with your debit card — provided you maintain an average monthly balance of $5,000 or more.

  • Access to Autobooks — an invoicing and online payment software that allows you to create and send invoices, accept payments, generate reports and reconcile transactions for accounting.

Additional services

  • Business credit cards, including cash back (up to 3%) and balance transfer options.

  • Business loans through Accion Opportunity Fund.

  • Merchant services and cash management solutions.

U.S. Bank: Best brick-and-mortar bank for nonprofits

U.S. Bank’s free nonprofit business checking account includes an annual bucket of free transactions and cash deposits, plus merchant services to help your organization accept donations online. The bank also offers a nonprofit business credit card that does not require a personal guarantor.

Business checking

  • Open your account online, in person or over the phone.

  • Free nonprofit business checking includes 1,800 fee-free transactions and 300 free cash deposits per year.

  • A nonprofit account earns interest, but the rate is minimal (APY of 0.005% as of this writing).

  • Minimum opening deposit of $100.

  • Nonprofit checking includes credit card payment processing (additional fees apply).

Additional services

  • More than 2,000 branches across 26 states.

  • Business credit cards, including the U.S. Bank Mastercard Community Card, which does not require a personal guarantor.

  • Business savings and money market accounts.

  • Business lending program that includes term loans, real estate loans, equipment financing and business lines of credit.

BlueVine: Best non-bank option for nonprofits

BlueVine technically isn’t a bank — it’s a financial technology company — but its high-yield business checking and business lending options could be a great fit for digital-savvy nonprofit organizations. Rest assured, all deposit accounts are FDIC insured up to $250,000.

BlueVine Business Checking

at BlueVine, Deposits are FDIC Insured

Business checking

  • No monthly service fee, overdraft fees or minimum opening deposit.

  • Earn 1.20% on your balance up to $100,000.

  • Unlimited fee-free transactions.

  • Cash deposits available at Green Dot locations, fees ($4.95 per deposit) and deposit limits apply.

  • No ATM fees at more than 37,000 MoneyPass ATMs nationwide.

Additional services

  • Business lines of credit available.

Fifth Third Bank: Best regional bank for nonprofits

Fifth Third Bank’s Business Standard Checking account typically carries an $11 monthly service fee, but that charge is waived for nonprofit organizations. The regional bank operates nearly 1,100 retail branches in 11 states, and customers have access to roughly 53,000 fee-free ATMs across the country.

Business checking

  • No monthly fee for nonprofit organizations.

  • 250 fee-free transactions and up to $5,000 in free cash deposits per month.

  • No minimum balance or opening deposit requirement.

Additional services

  • Business lending program that includes term loans, real estate loans and business lines of credit.

  • Business savings and money market accounts.

  • Discounted payroll services through Paycor.

Community banks, credit unions and CDFIs

Localized nonprofit organizations may find a better fit with a community bank or credit union. These financial institutions typically offer business banking and lending services, but may be better aligned with your organization’s mission than a national bank or for-profit financial institution. Credit unions, for example, are also not-for-profit organizations.

Nonprofit organizations may also want to seek out Community Development Financial Institutions, or CDFIs. These banks and credit unions have a strong community focus and serve people who are often not served by mainstream banking institutions.

How to choose a bank for your nonprofit

Consider the following factors when choosing a bank for your nonprofit:

  • Fees: Look for a bank that offers a free business checking account or has a specialized option designed for nonprofit organizations.
  • Accessibility: This can look different for every organization. Some nonprofits need online tools that help streamline operations. Others prioritize in-person banking and need easy branch access.

  • Additional services: Business checking accounts are often the foundation of a business banking relationship, but as your organization grows you may need other business accounts to build savings, access credit or process donations and payments.

  • Values: Consider a bank’s business activities, community outreach and philanthropic interests that align with your organization’s mission and values.

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Banking

Overdraft Protection: What It Is and Different Types

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Overdraft fees can be a major drain on your finances. Some banks charge more than $30 per overdraft and potentially charge that fee multiple times per day if you keep making transactions that overdraw your checking account. If you want to avoid these fees, you can typically opt out of overdraft coverage with your bank. It can be useful, however, to set up overdraft protection instead of opting out so you don’t find yourself unable to pay for something urgent.

What is overdraft protection?

Overdraft protection is a checking account feature that some banks offer as a way to avoid overdraft fees. There are several types of overdraft protection, including overdraft protection transfers, overdraft lines of credit and grace periods to bring your account out of a negative balance. Some other overdraft coverage programs might be a combination of these features.

Before you opt out of overdraft protection altogether — which means your bank will decline any transaction that would result in an overdraft — consider how you might need overdraft coverage in an emergency. For example, maybe you’re using your debit card to pay for gas on a road trip. You need enough fuel to get home but don’t have enough money in your checking account. Instead of dealing with running out of gas, you may want to deal with an overdraft.

How does overdraft protection work?

Here are more details about the main types of overdraft protection that banks tend to provide.

Overdraft protection transfers. When a bank allows you to make an overdraft protection transfer, you can link a savings account, money market account or a second checking account at the same bank to your main checking account. If you overdraft your checking, your bank will take the overdrawn funds from your linked account to cover the cost of the transaction. Many banks allow this service for free, but some banks charge a fee.

Overdraft lines of credit. An overdraft line of credit functions like a credit card — but without the card. If you don’t have enough money in your account to cover a transaction, your bank will tap your overdraft line of credit to cover the remainder of the transaction. Lines of credit often come with steep annual interest rates that are broken up into smaller interest charges that you keep paying until the overdraft is paid back. Be aware that a line of credit could end up being expensive if you use this option to cover your overdrafts.

Grace periods. Some banks offer grace periods, so instead of immediately charging an overdraft fee, the bank will give you some time — typically a day or two — to return to a positive account balance after overdrafting. If you don’t do so within that time frame, your bank will charge you fees on any transactions that overdrafted your account.

Other coverage programs. Some banks are taking a new approach to overdraft protection by offering what’s basically a free line of credit with a longer grace period for customers to bring their account to a positive balance. One example, Chime’s SpotMe® program, allows customers to overdraft up to $200 with no fees. The customer’s next deposit is applied to their negative balance, and once the negative balance is repaid, customers can give Chime an optional tip to help keep the service “free.”

Chime says: “Chime is a financial technology company, not a bank. Banking services provided by, and debit card issued by, The Bancorp Bank or Stride Bank, N.A.; Members FDIC. Eligibility requirements and overdraft limits apply. SpotMe won’t cover non-debit card purchases, including ATM withdrawals, ACH transfers, Pay Friends transfers or Chime Checkbook transactions.”

4 ways to avoid overdraft fees

  1. Set up low balance alerts. Many banks offer an alert option so you’ll get a text, email or push notification if your account drops below a certain threshold. These alerts can help you be more mindful about your balance so that you can put more money into your account or spend less to avoid an overdraft.

  2. Opt out of overdraft coverage. If your bank doesn’t offer overdraft protection — or if its only options cost money — you may want to opt out of overdraft coverage, in which case your bank will decline any transactions that would bring your account into the negative. Keep in mind that this option could put you in a sticky situation if you’re in an emergency and can’t make an important purchase because you don’t have overdraft coverage.

  3. Look for a bank that has a more generous overdraft policy. Many banks are reducing or eliminating their overdraft fees, so if overdrafts are an issue for you, do some comparison shopping to see if there are better options available.

  4. Consider getting a prepaid debit card. Prepaid debit cards are similar to gift cards in that you can put a set amount of money on the card, and once you run out, you can load it with more money. The prepaid debit card can’t be overdrawn because there isn’t any additional money to draw from once its balance has been spent.

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Banking

Are Small-Business Loans Installment or Revolving?

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A small-business loan provides funds to purchase supplies, expand your business and more. This type of funding can be either installment or revolving. Reviewing the credit terms of your loan offer will help you determine whether you’re being offered an installment loan or revolving credit.

Both types of loans can be found in the Small Business Administration, or SBA, loan program and at banks, credit unions and online lenders. While each can provide much-needed funding for your business, there are some key differences to keep in mind.

Installment loans vs. revolving credit

Installment loans provide a lump sum of money

An installment loan is a credit agreement where the borrower receives a specific amount of money at one time and then repays the lender a set amount at regular intervals over a fixed period of time. Typically, each payment includes a portion for interest and another amount to pay down the principal balance.

Business term loan is another common name for this type of loan. After the loan is paid off, the borrower typically must apply for a new loan if additional funds are needed.

Revolving credit provides flexible funds

A revolving loan is a credit agreement where the borrower can withdraw money as needed up to a preset limit and then repays the lender a portion of the balance at regular intervals. Each payment is based on the current balance, interest charges and applicable fees, if any. You pay interest only on the funds that you use — not the maximum limit.

A business line of credit is a common type of revolving credit. Revolving credit gives the borrower flexibility in determining when to withdraw money and how much. As long as the credit balance remains within the preset limit and you continue to make timely payments, you can continue to draw from the line again and again.

Differences between installment loans and revolving credit

The terms of a loan can vary depending on the type of loan, lender and your business’s credentials. Your loan may be a unique combination of terms. However, the following are some common differences between installment and revolving loan programs.

Installment loan

Revolving credit

Loan amount

Fixed amount.

Maximum limit.

Withdraw as needed.

Payment amount

Fixed amount.

Minimum amount based on balance and interest with option to pay more.

Interest calculation

Based on loan amount.

Based on current balance, not maximum loan limit.

Ability to renew

Not renewable, typically.

Renewable, typically.

  • SBA loans.

  • Business term loans.

  • Commercial real estate loans.

  • Equipment loans.

  • Microloans.

  • SBA lines of credit.

  • Business lines of credit.

  • Business credit cards.

When to use an installment loan

Set loan amount is needed

If you’re confident in the loan amount you need, then an installment loan may be the right fit, especially if you need the money in a lump sum. For example, if you’re using the funds to make a one-time purchase, you’ll likely want an installment loan.

Long-term financing needs

Some term loans can offer you more time for repayment when compared with revolving credit. When you stretch your payments out over a longer period of time, it can mean a lower monthly payment. However, that trade-off typically means you’ll pay more in interest costs over the life of the loan.

Larger funding needs

If you’re looking to purchase property, equipment or other large-ticket items, there are a number of installment loans that can be used for this purpose. Revolving credit limits are often less than term loan maximums.

Preference for predictable payments

With a set monthly payment amount, it can be easier to budget for an installment loan compared with a revolving loan, where the payment varies depending on how much of the credit line you use.

When to use a revolving loan

Short-term financing needs

Revolving credit can be good to handle short-term cash shortages or to cover unexpected expenses. Some businesses use lines of credit as an emergency fund of sorts since they’ll pay interest only on the funds they use.

Fluctuations in cash flow

Businesses that experience major fluctuations in their cash flows may benefit from revolving credit. For example, seasonal businesses that don’t have consistent revenue throughout the year can use lines of credit to cover operational costs during their slow season.

Preference for flexible loan amount and payments

If you don’t know exactly how much money you need, then revolving credit will give you the option to qualify for a maximum amount but only withdraw funds as you need them. This way, you’ll pay interest only on the current amount owed.

Compare small-business loans

To see and compare loan options, check out NerdWallet’s list of best small-business loans. Our recommendations are based on the lender’s market scope and track record and on the needs of business owners, as well as rates and other factors, so you can make the right financing decision.

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Advantages and Disadvantages of a Business Bank Loan

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According to the Federal Reserve’s 2021 Small Business Credit Survey, banks remain the most common source of credit for small businesses — compared with options such as online lenders, community development financial institutions or credit unions.

You can use a business bank loan for a variety of purposes: working capital, real estate acquisition, equipment purchase or business expansion. To qualify for one of these small-business loans, however, you’ll likely need excellent credit and several years in business.

Before applying for a business loan from a bank, consider the following advantages and disadvantages.

Advantages of business bank loans

Flexible use of funds

Banks offer a range of different business loan products, including term loans, business lines of credit, equipment financing and commercial real estate loans, among other options. Unless you opt for a product that has a specific use case, like a business auto loan, for example, you can generally use a bank loan in a variety of ways to grow and expand your business.

When you submit your loan application, the bank may ask you to identify a purpose for the financing to evaluate the risk of lending to your business. Once you’re approved, however, the bank is unlikely to interfere if you change your intentions, as long as you make your payments. This flexibility is perhaps one of the biggest advantages when comparing debt versus equity financing.

Large loan amounts and competitive repayment terms

Bank loans are often available in amounts up to $1 million or more. Many online lenders, on the other hand, only offer financing in smaller amounts. Popular online lenders OnDeck and BlueVine, for example, both have maximum loan limits of $250,000.

Business loans from banks also tend to have long terms, up to 25 years in some cases. These loans usually have monthly repayment schedules, as opposed to daily or weekly repayments.

In comparison, online business loans typically have shorter repayment terms, ranging from a few months to a few years. Many of these loans require daily or weekly repayments.

Low interest rates

Banks typically offer small-business loans with the lowest interest rates. According to the most recent data from the Federal Reserve, the average business loan interest rates at banks range from 3.19% to 6.78%.

Although some online lenders can offer competitive rates, you’ll find that their products are generally more expensive than bank loans, with rates that range from 7% to 99%.

The interest rates you receive on a bank loan, or any small-business loan, however, can vary based on a number of factors, such as loan type, amount borrowed and your business’s qualifications, as well as any collateral you provide to back the loan. In general, the stronger your qualifications and the more collateral you can offer, the better rates you’ll be able to receive.

Relationship with a bank lender

Many banks provide ongoing support for their lending customers, such as business credit score tracking or a dedicated relationship manager to work with your business. Most banks also offer other types of financial products, such as business checking accounts, business credit cards and merchant services, if you prefer to use one institution for your financial needs.

Although some alternative lenders offer additional support and services, the Federal Reserve’s 2021 Small Business Credit Survey reports that businesses that receive financing are more satisfied with their experience with small banks (74%) and large banks (60%) compared with online lenders (25%).

Disadvantages of business bank loans

Intensive application process and slow to fund

To apply for a small-business loan from a bank, you’ll need to provide detailed paperwork that may include, but is not limited to, business and personal tax returns, business financial statements, a loan purpose statement, business organization documentation, a personal financial statement form and collateral information. You may have to visit a bank branch and work with a lending representative to complete and submit an application — although some banks offer online applications for certain business loan products.

The entire process, from application to funding, can take anywhere from several days to a few weeks, or even longer, depending on the type of loan and the bank. Some banks will also require you to open a business checking account with them before you can receive funds.

In comparison, alternative lenders typically have streamlined, online application processes that require minimal documentation. Many of these lenders also offer fast business loans — in some cases, funding applications within 24 hours.

Strict eligibility requirements

To qualify for a business loan from a bank, you’ll generally need strong personal credit (often a FICO score of over 700), several years in business and a track record of solid business revenue. Bank of America, for example, requires a minimum annual revenue of $100,000 for unsecured term loans and a minimum annual revenue of $250,000 for secured term loans.

Depending on the bank and the loan type, you may need to provide collateral, such as real estate or equipment, to secure your financing. Most banks will also require you to sign a personal guarantee that holds you personally responsible for the debt in the event that your business can’t pay.

Online lenders, on the other hand, have more flexible qualifications and some will work with startups or businesses with bad credit. To qualify for a business line of credit with Fundbox, for example, you only need six months in business, a credit score of 600 or higher and at least $100,000 in annual revenue.

Although online lenders may still require a personal guarantee, they’re less likely than banks to require physical collateral.

Find and compare small-business loans

Still trying to determine the right way to finance your business? Check out NerdWallet’s list of the best small-business loans for business owners.

Our recommendations are based on the market scope and track record of lenders, the needs of business owners, and an analysis of rates and other factors, so you can make the right financing decision.

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