Weak Economy Leaves Long Island Nonprofits Squeezed by Banks
March 24, 2009, Newsday — When SNAP Long Island needed some extra money earlier this year, it asked its bank for an extension on its existing line of credit.
Payments from the state for contracted services were slow in coming, so the nonprofit needed cash to pay workers, said executive director Marcia Spector.
But when the Patchogue nonprofit, which runs services on teen pregnancy, approached the bank officer, "not only did he refuse our request for an extension to the credit line, but he froze the existing line that we needed for our payroll," Spector said.
The result was that Spector was forced to place her entire 20-person staff on a 2 1/2-week furlough, and she even thought of taking out a loan on her personal mortgage to pay SNAP's bills.
"We came very close to going out of business, basically," Spector said.
Spector isn't alone. Throughout Long Island and beyond, nonprofits have found that the economic climate has led banks to be increasingly less willing to loan them money. Lines of credit are reduced or frozen - a problem for nonprofits that rely on the loans while they wait for typically delayed payments from the government for contracted services.
"What the banks are saying is, 'We've already lost money out there,'" said Ken Cerini of Cerini & Associates, a Bohemia-based CPA firm that has a large nonprofit clientele. "They're looking at the nonprofit sector and saying, 'Look, we don't want to be sitting out there on the hook.'"
Even large nonprofits are feeling the pinch. SCO Family of Services in Glen Cove has an annual operating budget of just under $200 million. But in August, its bank slashed SCO's $25-million credit line by 40 percent, said executive director Bob McMahon.
It also refused to grant the organization a letter of credit so SCO could apply for state grants for the agency's capital campaign, McMahon said.