Remote Deposit – Why is it right for me?
Banking really hasn’t changed much over the years. We still use some of the same banking procedures that were developed ten, twenty, and even fifty years ago. Every so often there is a new innovation that comes along to shake things up a bit, and make us question the way we conduct our banking activities.
On October 28th, 2004 we had one such change when “Check Clearing for the 21st Century Act”, otherwise known as “Check 21″ went into effect. This law mandated that any electronic image could be presented in lieu of an original check. The provisions of this law sent the banking world into a flurry of activity, revamping the way checks moved through the Federal Reserve System. No longer would a bank need to sort checks by Federal district and transport large bulky containers of paper to the Federal Reserve for processing. Instead they could scan all of the checks and submit a file electronically, reducing costs and speeding up clearing time.
Soon more innovation followed. Not only were banks processing electronic files, but now business clients could scan checks from their own office. More recently a handful of banks have been offering consumers the opportunity to scan checks from their smart phones and deposit remotely to their bank.
Is remote Deposit right for you?
Here are the advantages:
1. Gas Savings – no need to fill up the tank traveling to the bank and back.
2. Saves time – No more waiting in traffic or a bank line.
3. More efficient workers – If they aren’t making trips to the bank, then they are working in the office.
4. Save Paper and toner – No need to make copies of all the checks. The Bank’s servers contain online records and images of each deposit.
5. Faster clearing times – If you have clients that bounce checks, you get to know sooner than normal.
All of the savings above result in a reduction in soft costs and increase in efficiency. However there are hard costs for using the service. You need to make sure that you process enough deposits weekly to warrant the expense. If you only go to the bank occasionally, or if the bank you visit is in the same building this may not be the product for you.
If you go to the branch at least 3 times a week however, you will thank yourself each time you look out the comfort of your office window to see people trudging through rain, sleet, snow, hail and dark of night to get their deposits to the bank on time!
Contact us if you would like to learn more about this product!
Which Business Checking Account is the Right One for Me?
Many new business owners ask themselves the question of which business checking account is the right one for them. Even experienced business owners who have had many accounts over the entirety of their business ownership do now know the answer. Part of the reason for this confusion is the various names, features, and perks that every bank comes up with for each of their accounts. In reality though, wipe away the slight differences each bank tries to offer and you will see that each bank offers the same two options.
•Basic Business Checking – This is the first option that banks offer and the one that is generally the best option for most small businesses. This type of account can usually be kept fee-free by completing a few small requirements. These requirements today generally consist of meeting a balance threshold in the account itself, using a debit card a certain number of times, or meeting a balance threshold for all of the accounts you have with an institution. This account usually offers basic internet banking services, plenty of check writing privileges, and plenty of cash depositing/withdrawing ability for the wide majority of small businesses.
•Analyzed Business Account – This is the second option that banks offer and is usually only needed in special scenarios for a small business or once a business becomes larger. This type of account will have fees involved no matter what and can only be offset by earnings credits a bank offers based on the balance of the account. Earnings credits are easier thought of as interest, but banks cannot pay interest on business accounts, so they instead offset fees with credits. This account will allow a business to use any banking service that a bank could offer. Businesses that want to initiate their own electronic crediting and debiting of other’s accounts, perform a large amount of wire transfers, or handle a large amount of cash would all find use in having an analyzed account.
Most banks offer slightly different versions of each of these accounts, but they are all based on each platform. If you want further details on which one of these accounts is best for your business, we are always here to offer the best Chicago banking advice. Just submit your information and question with our contact form. We will follow-up with an answer for you very shortly.
Relationship Banking – The myth…the legend
In today’s economic climate, it is very common to hear that relationships aren’t valued. Many people are struggling to get by. Major corporations and industries treat all customers as a number. They work to maintain the status quo, and don’t think outside of the box.
Nowhere is this belief more prevalent than in the banking industry. Many people believe that the “Relationship Banker” is gone, slowly disappearing into the shrouded mist of our memories along with the once coveted community bank. People believe that with the consolidation of banks into larger institutions, that the industry has lost that personal touch. No longer are you greeted by name as you walk through the door, nor do you receive a warm smile from the teller as you make your deposit. This loss of community identity has been accelerated by advances in technology. Call centers, remote deposit, and internet banking have made it virtually unnecessary to make a visit to the bank. Many people also believe that it is strictly monetary gain that drives a banker’s actions.
Yet despite all of these facts there is one thing that everyone seems to forget. Relationships are made up of people, not institutions. Every bank, no matter how large or small, is staffed with individuals who are genuine, pleasant, and caring. These individuals want to help people. They receive a great deal of personal gratification assisting clients and helping them fulfill their dreams.
Let’s also be honest…relationships involve more than one person. When was the last time you stopped in to chat with your banker, and it wasn’t about a bank mistake? Have you ever offered to take a banker out for coffee? Bankers aren’t the only ones to be blamed if all we do is sit in our office and conduct transactions from our computer.
Listen, we all know what it takes to succeed in business. You need to market yourself and grow your portfolio of clients. You also need to be genuine, honest, and hard working. You must make yourself accountable to your clients, and be responsive. These are the same traits that bankers are taught to exemplify. Some are able to live up to these expectations better than others, but I truly believe that they all make the effort. Many of them want to help their clients and become involved beyond the transactional level. They want relationships.
As a business owner, you can help to facilitate this. Just as you would always surround yourself with a core group of advisors, you should have a strong relationship with a banker. You probably have a great relationship with your CPA, your attorney, and maybe even a peer coach of some type. Each of those other advisors provides you with a wealth of knowledge and experiences. They share their ideas as if they were a partner in your company. You share with them your successes and your failures. You spell out your expectations and determine what their limitations are. Do the same with your banker.
If they are truly worth their salt, they will congratulate you as you climb the ladder of success, and console you when you fall. More than that though, a good banker will help you get back up.
If you make the effort and get nothing in return, it’s time to find another banker.
Cash flow…the lifeblood of any business!
I had a reader just recently ask me for some banking advice Chicago. She said, “I applied for a line of credit at a couple of banks in Niles, and no one will approve me. Where can I get a business loan Chicago?”
After chatting with her a bit, I realized that the company didn’t really need a loan so much as it needed to improve its collection practices. Here is a quick breakdown of what was happening:
The company would bid on a project, and if successful, take a 20% pre-payment for services. Then the work begins. Material is purchased, staff has to be paid, and energy/time is expended to complete the project all on the company’s dime. At the end of this process, she had spent an amount equal to 100% of the project’s cost, having only been paid for a portion of it. Now it comes time to bill. An invoice is mailed out, with a request to pay within 45 days of invoice date. Then the payment (assuming it is made on time!) arrives and it takes another couple of days to deposit it and clear the funds through the bank. She has been without income for more than two months, yet the expenses and overhead continues.
So how would a business resolve this issue?
1. Create terms that are more favorable – Ask for all payments within 30 days of invoice date, and if paid within 15 days or less offer a small discount. This will incentivize the client to pay you faster.
2. Hold your clients accountable – If they miss a payment, or pay outside of the terms charge a fee for late payment.
3. Send your invoices by e-mail – Not only does this prevent the “lost in the mail” excuse, but it gets them to the client faster.
4. Offer to electronically debit the client for payment – this speeds up the clearing time and trips to the bank, and helps cut out mailing time.
5. Follow up with phone calls – clients don’t mean to miss a deadline, but they get busy like the rest of us. A gentle nudge might be all they need.
6. Clearly define your payment terms – Whatever terms you end up deciding on, you have to make sure that you express them early in the conversation. You also need to make sure that your attorney details the terms clearly in the contract that you will be using.
If you have questions about how to obtain a business loan Chicago, or want to know more about collection methods contact me here.
Why We Offer Banking Advice for Chicago Businesses
Welcome to our new blog on banking. Much of what we discuss on this site will be focused on business banking advice for those who own small businesses in Chicago. However we are not limited to giving advice in just this area of banking. Anyone seeking advice on any banking topic is more than welcome to contact us using the contact form on this site. Our group of writers is very experienced in all aspects of banking and can always find an answer to a question if they do not know the answer themselves.
Banking advice Chicago will be our main focus though. We have found that many people who enter into business ventures in the Chicagoland area often find honest, unbiased banking advice hard to find. There is usually no shortage of banks offering their services to these business owners, but the advice they provide is often lacking. They usually have the best interest of the bank they represent in mind, not the best interest of the clients they serve.
We find this type of approach appalling. The main function of a bank should be to provide sound financial advice to their clients in order to build a long term relationship with them. The advice we are looking to provide on this site will fall in line with this premise. Here you will not find any specific product recommendations; products one bank can offer can be duplicated by another within a short period of time. Instead you will find banking advice Chicago directed towards business operating in and around the city.
Businesses in different geographic areas have different banking needs. If someone needs a list of banks in Niles it will matter if this list is for Niles, IL or Niles, CA. A big national bank that is located in both areas will not necessarily be the best option for every small business. When someone needs business loans Chicago they will need a bank that understands the needs of businesses in Chicago.
Our aim is to provide our readers with the knowledge they need to make informed decisions on the best banking practices for their business. If you find that you have a question that we don’t answer on this site, please send it to us using the contact form found here.
House Rich, Cash Poor
So you have a building. You own it free and clear. You are making a fair amount of money. Wouldn’t it be great to have another building supplementing your income? Don’t you think this is a great time to take advantage of all these great real estate deals? So it occurs to you, why not use the current property as collateral for another great piece of real estate!
In days gone by this was a very common practice. I have personally seen a number of people utilize one commercial line of credit to purchase another property. Then they take out a second loan to buy another rental unit or building. Then, since the new property is basically owned free and clear, they leverage it to buy yet another. Rinse, Wash, Repeat!
On paper this sounds like a great plan. You can become a real estate mogul overnight. Look out Donald Trump!
But what happens when you can’t get one of those properties fully rented. What happens when there is a ton of maintenance or repair work that needs to be completed? Or, as happens far too often in Chicago, your property taxes spike because the building is no longer receiving a vacancy exemption, and you were just reassessed? If you bought a distressed property, did you discover that there were some major construction issues that had to be corrected before you could rent the property out?
All of this begins to hit you, yet you think to yourself: There is a safety net, right? If you get too deep, you’ll just sell it, right?
WRONG.
In today’s market there are so many properties for sale that it would be hard to offload the ones you have. This is especially true, if the properties aren’t performing. Why would an investor buy the unit that you couldn’t get fully rented out, especially if it doesn’t cash flow? After all, there is another fully rented building just like it down the street!
UGH!!! Six months later and you still haven’t sold the place. So what happens next? You have to start utilizing cash flow from your other buildings to cover the expenses of the first building. Soon your reserves become depleted and you are struggling to make those interest only payments on the 5 buildings you recently purchased. Let’s face it, you had to lower rents in the buildings to compete with the other properties out there. A lower price per square foot has reduced your profit margins(if you are making money at all). Cash is tight every month. There is a chance that you can squeak by. You make some sacrifices: One less visit to the local pub each week, fewer expensive dinners out with the girlfriend, perhaps you don’t bother to order that pay-per-view fight on HBO. You manage to survive, tighten your belt, and a year goes by. Then you get a call from your banker…You’re loans are up for renewal.
Every penny has come due, and based on your latest financial picture you don’t qualify for a refinance. Foreclosure is looming ever present; you don’t know what to do! In the end each lender comes looking for their money. You continue to try and sell the buildings, but only get offers for pennies on the dollar. Banks won’t agree to a short sale…or even if they do you are now upside down. Your credit is ruined, and eventually you are stripped of all of your property.
It’s a scenario that has played itself out so many times over the last few years. Don’t get me wrong, you can finance the purchase of a building. However what was done in this scenario was essentially what brought about the housing bubble in the first place. People are using their real estate as an ATM, and they are buying properties essentially at 100% financing. At the end of the day, the formula outlined above doesn’t give you enough equity to safeguard you against losses. Having so many loans can also sap your cash flow.
So if you want to buy another building, you have to talk to your banker and make sure that you understand the options that are available to you. The banker will expect you to put some cash down on the property and will term out the loan over a longer period of time, and guarantee your rate for a period of 3-5 years. Your payments should be designed to reduce the principal on your mortgage each month. Your banker should also ensure that the building would cash flow even with a certain percentage of vacancies, giving you a cushion against a weak rental market. They would also be doing you a favor if they review your global cash flow to ensure that you can cover your monthly payments with a sufficient cushion for any contingency.
This may seem like a hassle, and no one enjoys the hoops that banks put them through, but it is done for a reason. Not only is the bank looking to protect itself, but it’s also looking to protect you, the consumer. A banker that cares about his relationships has a vested interest in making sure that you succeed. As you grow and prosper, so will the banking relationship. That means the opportunity for more products and services to be offered, and potentially larger deposit balances.
So before you jump into the real estate market, make sure you speak with a seasoned, knowledgeable banker first. Get their advice, and let them be your partner through each important step.