You have a great idea for a new business… now how do you turn it into reality? It’s important to find a trusted and knowledgeable banker to help easily manage the everyday finances of your business. In episode 02 of fIRST things First, we break down everything from documents you may need to present when opening a bank account, what you should look for when talking with a banker, to fraud protection and types of deposit accounts and other products and services available to help make banking more convenient, easier and possibly even save time.*
Own a business? Want to start one? Now what? There are many loan choices out there today for small business owners and it can be challenging to understand the differences. In episode 01 of fIRST things First, we break down the different types of Small Business Administration (SBA) loans available to help business owners start and grow their business.*
*fIRST Things First podcasts are for informational purposes only. Any information provided is not intended to replace the advice of a qualified legal, accounting, or tax advisor. You should consult with the appropriate professional before any business decisions are made.
You successfully started your business, now what? A business bank account is a great first step that will help you stay legally compliant and protected when you're ready to start accepting or spending money. It also provides benefits to your customers and employees. Opening a business bank account is a simple process but documentation is required to open an account and may vary by financial institution but here are some examples of things that you may need to bring with you:
· Employer Identification Number (EIN) (or a Social Security number, if you're a sole proprietorship)
· Your business's formation documents
· Articles of incorporation
Benefits of business accounts
· Protection. Business banking offers limited personal liability protection by keeping your business funds separate from your personal funds. Merchant services also offer purchase protection for your customers and ensures that their personal information is secure.
· Professionalism. Customers will be able to pay you with credit cards and make checks out to your business instead of directly to you. Plus, you'll be able to authorize employees to handle day-to-day banking tasks on behalf of the business.
· Preparedness. Business banking usually comes with an option for a line of credit for the company. This can be used in the event of an emergency or if your business needs new equipment.
· Purchasing power. Credit card accounts can help your business make large startup purchases and help establish a credit history for your business.
Benefits of a full banking relationship
One of the most important aspects of owning a business is the relationship between you and the banker. You need to build trust and have confidence. A banker will ask questions to understand the nature of your business, cash flow and information about financial statements. Sometimes you will get an introductory offer or rate in the mail from a financial institution but those offers only last for a short period of time. It really comes down to building a relationship and knowing and trusting your banker.
Additional business products to consider
A debit card will allow you to set up electronic purchasing and recurring supplier payments, make purchase online or in-person and protect your business from unauthorized purchases with Visa’s Zero Liability Policy.
A credit card will allow you to make business-related purchases online or in-person, build a credit history, improve payment flexibility, optimize cash flow and protect your business from unauthorized purchases with Visa’s Zero Liability Policy.
Remote deposit Capture will improve cash flow by accelerating the collection and clearing of customer check payments by preparing and processing check payments electronically. It will also reduce costs by decreasing time, transportation and administrative expenses associated with your bank deposits. You can also make deposits from multiple locations and/or to multiple accounts from one platform.
Online banking is important to help you stay in control of the daily account management. Online banking services provide encrypted, secure access for you and designated employees to manage your business accounts, transactions and activity.
Merchant services allow you the ability to accept credit and debit card payments from customers through a secure, encrypted channel. It can help your business strengthen customer relationships, improve cash flow and streamline payment process.
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Do you own a business or plan to start one and need funding? Start or grow your business with loans guaranteed by the Small Business Administration (SBA). The SBA doesn’t lend money directly to small business owners. Instead, it sets guidelines for loans made by its partnering lenders, community development organizations and micro-lending institutions. The SBA guarantees these loans will be repaid, which eliminates some risk for the lending partners.
SBA Size Requirements
The SBA defines small businesses that qualify for funding into three categories. Manufacturing companies with fewer than 500 employees, retail oriented business averaging less than seven million in sales and any business with profitability less than an average of five million or a net worth less than $15 million.
Guidelines for SBA Lending
Lenders and loan programs have unique eligibility requirements. In general, eligibility is based on what a business does to receive its income, the character of its ownership and where the business operates. Normally, businesses must meet size requirements, be able to repay and have a sound business purpose. Even those with bad credit may qualify for startup funding. Lenders will provide you with a full list of eligibility requirements for your loan which may include:
· Officially registering as a business
· Physically located in and operating in the U.S.
· Owner investing their time or money in the business
· Exhausting all other financing options
Types of SBA Loans
The Small Business Administration provides loans for credit-worthy purposes such as the acquisition of business real estate, machinery or equipment, working capital or other ventures.
Explore some of the most popular SBA loan offerings below:
· SBA 7(A) is the most frequently used and can be used for a variety of business needs from acquiring real estate, equipment, establishing a new business, acquiring a business, or expansion with a lending amount up to $5 million
· SBA Express can be granted to businesses in need of a revolving line of credit up to $350,000
· SBA CAPline is designed to help small businesses meet their financial and cyclical working capital needs with the ability to offer up to 5 million in a revolving credit line
· SBA 504 provides long-term, fixed rate financing to acquire major fixed assets for expansion or modernization and the assets are typically real estate, buildings, equipment and/or machinery and loan amounts up to $5.5 million
· SBA export loan and express export loan are for any company that exports directly or they supply product to a company as a primary exporter
Choosing the right lender
Choose a lender that is knowledgeable and understands the ins and outs of financing. When it comes to SBA financing, the lender needs to be able to show you the value of using SBA – the costs vs. the benefits. You want to look for someone who asks questions and offers you the right solutions for your business needs.
Watch out for interest rates that are significantly higher than competitors’ rates, or fees that are more than five percent of the loan value. Make sure the lender discloses the annual percentage rate and full payment schedule. A lender should never ask you to lie on paperwork or leave signature boxes blank. Don’t get pressured into taking a loan. Survey competing offers and consider speaking with a financial planner, accountant, or attorney before signing for your next loan.
Documents needed to apply
Not all loans are the same - each loan is unique. You may not be required to provide all of these items, but some of the most common documents a lender may ask you to provide are: personal documents, resume, business plan with projections, personal and business credit reports, income tax returns, financial statements, bank statements, collateral and legal documents.
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Small businesses with less than 100 employees experience a median loss of $154,000 due to fraud, according to the Association of Certified Fraud Examiners (ACFE). This number is higher for small businesses than most large companies.
All businesses face unique challenges in the fight against fraud and employees and customers are just a few people who might take advantage of your small business. Corporate account takeover is a type of fraud where thieves gain access to a business’ finances to make unauthorized transactions, including transferring funds from the company, creating and adding new fake employees to payroll, and stealing sensitive customer information that may not be recoverable. Here are a few tips help to keep your small business safe:
Educate your employees
You and your employees are the first line of defense against corporate account takeover. A strong security program paired with employee education about the warning signs, safe practices, and responses to a suspected takeover are essential to protecting your company and customers.
Protect your online environment. It is important to protect your cyber environment just as you would your cash and physical location. Do not use unprotected internet connections. Encrypt sensitive data and keep updated virus protections on your computer. Use complex passwords and change them periodically.
Work with your bank to prevent unauthorized transactions. Talk to your banker about programs that safeguard you from unauthorized transactions. Positive Pay and other services offer call backs, device authentication, multi-person approval processes and batch limits help protect you from fraud.
Pay attention to suspicious activity and react quickly. Look out for unexplained account or network activity, pop ups, and suspicious emails. If detected, immediately contact your financial institution, stop all online activity and remove any systems that may have been compromised. Keep records of what happened.
Understand your responsibilities and liabilities. The account agreement with your bank will detail what commercially reasonable security measures are required in your business. It is critical that you understand and implement the security safeguards in the agreement. If you don’t, you could be liable for losses resulting from a takeover. Talk to your banker if you have any questions about your responsibilities.
For more tools and resources visit:
Businesses should prepare for the impact of the many hazards they face in today’s world including natural disasters, serious illness, technology related hazards and human related incidents. It is important to have a disaster plan to keep your business running.
The Department of Homeland Security is a great resource and their site provides a five step program to prepare your business for a disaster. The five steps are Program Management, Planning, Implementation, Testing and Exercises and Program Improvement. To find out details about the five step program and for more information on this topic, visit https://www.ready.gov/business.
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