Business Checking accounts

Hello, and welcome to this module Business Checking Account. So this is going to be really impactful, even if you already have an existing business checking account. I want you to go through this because I’m going to cover some really key details that I wish I would have knew when I first started out. But also how to ensure that you get the best business checking account so you can maximize your funding. So here’s what we’re going to cover. So, number one, what I’m going to get into is how to choose the right bank to work with. So this is pivotal right out the gate, we want to choose the correct bank. Then the role your cashflow slash bank rating will play with your corporate credit profile. Mostly going to break down the small business financial exchange. So you understand what that is, bank ratings, and how to choose a bank based off their ratings.

And then lastly choosing the right bank. So let’s go ahead and hop right in. So business banking. So, um, many people don’t know this, but did you know that credit bureaus consider the day you open your business bank account the real first day of you being in business? It’s true. So even if you’ve registered your business years ago, but you never opened your business checking account, it wouldn’t be considered a new business until you actually have the business checking account opened. So using a personal bank account is not an option in this section. I’m going to be covering the vital components of a business banking relationship and why we want to have it. So, number one, I’m going to cover how to choose the right bank. Number two, the role your banking cashflow comes into, and then number three the benefits of establishing a microloan, which I’ll get into in another module later on and in business banking.

So how do we choose the right bank to bank with? So when it comes to choosing a bank to work with, it’s important to choose a member or banking relationship, that’s a member of the small business financial exchange. So the small business financial exchange is an organization that has non-affiliated banks of orders that have nine affiliate banks that share credit information of US businesses, including loans, credit lines, leases, credit cards, and SBA loans built to manage built and managed by Equifax. Now, a few banks that are a part of this organization are American Express, Bank of America, Capital One, BB&T, PNC, SunTrust, Wells Fargo and 127 other lenders. So just to name a few, Bank of America already said that Chase, Citibank, all of these larger banks are going to be a part of the SBFE. Now, only financial institutions and leasing companies are able to become SBF SBEF members and only other members or other companies that contribute data or allowed to access the database.

While me and you cannot see what the SBF collects, lending institutions, web access to this database and check what has been gathered on your business before descending to, before deciding to extend funding to you. This is why it’s so critical to identify that banking relationship. That’s a part of this also, when you already tapply for a loan, this is going to be the first place that banks check and other in lending institutions are going to check to get information about your company’s credit history. This is why it’s critical that you choose a bank that’s a part of the SPEF member or association, or that’s a part of that. Now we get into going into this particular information in more detailed. We also not only want to make sure that they are SBF member. We also want to make sure that they’re small business friendly and they have aggressive lending practices.

So, because we want to ensure that we’re getting funding. Now, while it will become easier for your company to get approved for funding, as you continue to build up your credit profile. I’m also going to recommend using smaller Regional Banks that has less stringent underwriting criteria. Basically the guidelines lenders use to determine your credit worthiness as a borrower to increase your credit approval rates as much as possible as we’re building up their corporate credit file. So one of the things I’ve noticed about banking and banking relationships is that they’re going to vary, they’re going to vary their features based off the business, based off their businesses, and then based off the business you are in. So for example, certain institutions may be able to offer you overnight funding or merchant accounts, affordable payroll services, multi debit cards, and others would normally not be able to offer those things unless you have six-figure, unless your company has a six figure balance.

So it really depends on what you’re looking to do and identifying that banking relationship that’s going to suit you the best. A few other things, so a mistake that I see a lot of businesses make, especially business owners and entrepreneurs is immediately going to a large Nationwide Bank. And here’s a problem that most of them don’t lend to start-ups. So we want to identify if we’re going to go with one of those large national banks that they will lend to start-ups. So if you already have a banking relationship or business bank relationship, it’s not, it’s probably not a good idea to switch it. So if you’re already banking with someone and it’s a business checking account, keep that relationship there and we’re going to maximize that relationship. But, but we also, I’m going to recommend that you look for business, business friendly banking before researching additional options.

So, also, I want you to keep in mind that your business banking transactions will be a part of your corporate credit file. This is huge. And some other larger Nationwide Banks, IE Chase, Wells Fargo directly reports this information to the SBFE database, including bureaus like Dun & Bradstreet, Experian, and Equifax. So this is another reason why I personally, I per I personally bank or professionally or on the business side bank with chase bank. And my lending is not that difficult for me to get approved because I have larger balances and I keep strong cash flow, and I’ve never, ever, ever, ever had a late fee in my business checking account. So this is like a, a thing that you want to understand and be able to maximize. Now, when it comes to bank ratings, creditors and lending institutions want to know your company is capable of making timely payments and handling business debts on a consistent basis.

This is why cash flow is so important. And why I started this particular system out with the wealth triangle. A bank rating is not to be confused with a bank credit rating. Okay? So let me explain the difference. The bank rating is the average balance maintained in a business bank account over a three month period. There are minimum bank ratings that lenders want to see before approving funding. The minimums were very dependent upon the amount of the loan you request. Typically ends up being about 10% of the loan that you request. So if we’re looking at bank ratings, Low 4 means, my average account balance is between $1,000 to $3,999. And then Mid 4 is $4,000 to $6,999. High 5, high 4 is $7,000 to $9,999. Low 5 is $10,000 to $39,999. Mid 5 is $40,000 to $69,999. And, High five is $70,000 to $99,999.

So this is what the bank rating is going to look at based off the account balances that you have in your business checking account. So, for example, if you were, if you, if a loan request requires an amount, let’s just say a thousand dollars with a monthly payment bank lenders. When they see that you have at least a low 5 bank rating, which is at least $10,000. So if you’re trying to get a monthly payment for a thousand bucks, you need to at minimum have a $10,000 balance in order to cover that particular scenario based off being able to get funding. Okay, now your bank rating is very important. Now I want to make this very, very clear your bank rating is your bank rating as a business owner. So you want to make sure that your monthly payments, you make all your payments on time and you keep as much money in your account as possible.

And at the end, your bank is going to have a, at the end your bank is going to have a, what we call an excellent rating. So you want to do your best to have and keep a low 5 rating. And again, banks are linked through the SBFE database that operates through Equifax. So whenever we’re saying, Equifax’s that one, even though it’s very difficult, this is that important role Equifax plays, and it will affect how much financing your company gets approved. Well, that’s why we want to make sure in the next module, I’m going to get into managing your cashflow that in this module right after, but in this set of modules, I’m going to break down managing your cashflow as an entreprenuer, ensuring that you keep a good, a good healthy balance there. Now, each bank is going to slightly differ with the features which can help speed up or slow down your credit building and cashflow.

So for example, Wells Fargo has low balance fees, but requires direct deposits for business accounts or higher balance requirements and hold your receivables checks for weeks, which I don’t, I don’t like Wells Fargo personally, on the other hand, PNC Bank allows low balances and has no direct deposit requirements. So it was really, really important to understand all the requirements that these banks are going to have. So when it comes to choosing the right bank, another example is US Bank, which uses an internal RMS rating to decide if you’re a good client, but other banks like Comerica and or HSBC, which cater to large, real, real businesses offer a business banker. And I can speak to a personal experience about the business Bank. I was able to get approved for a larger credit card, but by just leveraging a business banker.

Now, the business banker is where you open up an account and is going to make the decisions based off your presentation or how much overdraft protection you should have, etcetera. Now I’ve had clients open up 4 to 5 HSBC accounts under their corporation that are linked online. And even the, even in a tight times that the ATM still allows them to withdraw a thousand dollars overdraft with very, very low negative balance. So essentially what I’m trying to communicate to you is depend upon that bank in is its appetite for risk, but being an aggressive lender, you potentially could overdraw those accounts personally, way back in the day, I was able to overdraw all my PNC bank accounts, which I’m not recommending that you guys do because of their understanding of small business lending, but those fees were extremely high.

So I’m not recommending you do that, but I’m just giving you an example of how these banks work. Now, when it comes to choosing the right bank, it’s a big deal to, you know, the it’s number one, choosing the right bank is it is a big deal. So I want you to make sure you spend adequate time on this step before deciding you want to keep in mind that the bank will be a lifelong partner to your business, right? You want a bank that is willing to work with you when problems arise, because it’s not a good idea to switch banks if you can. you wouldn’t. Basically, you want to keep that relationship going because they’re going to look at this as longevity, because for, for instance, my, my holding company has been with the same bank Chase since its inception. So as when I established the incorporation, I went and opened up the bank account and I’ve kept a banking relationship with them the entire time.

So when you’re applying for a loan, this is the last step in the process. And it’s also going to be an opportunity to secure a large amount of funding. So keep that in mind when choosing your bank, we want to make sure whatever bank we stick with, they’re going to be really, really good for us and what I call an aggressive lender. So, then here’s a really important update since COVID-19, it’s been a little harder for businesses to get approved for loans from banks. So according to Biz2Credit business loans approvals at banks are down more than 50% in December 2020 compared to 2019. This is going to turn around. But in the meantime, you need to keep in mind what they’re looking for. And you want to look out for banks that lend to new businesses or startup companies that have been in business for less than two years.

So when it comes to lending, almost all banks are going to look for some of the same things. And those things are going to be number one in existing relationship. Some banks are going to require a checking account and others may not require you to hold an account with them for 12 months or less when it comes to financing. Some will, some won’t unless you have a relationship with another bank. Also good credit. Banks are going to check your business credit score for red flags. That’s why we did all of this information on the front end for our business credit reports first before you went and did these banking accounts. And then they’re going to look at your rating for high debt ratios, too many open accounts, negative remarks, late payments, and default or bankruptcies. Again, we don’t want to have bankruptcies. And then banks will only know that your company has enough revenue to pay back

what is borrowed. Some banks, unsecured business loans require at least $100,000 in annual revenue, which is really simple as it’s $8,300 per month. And you guys can more than likely do that and make that happen. So another one is enough time in business. So being in business under the same ownership for at least two years is a standard and some lending institutions where require six months in the business while others may require three years. Okay. So collateral putting up collateral like property equipment accounts receivable isn’t necessarily to get a business loan, but many banks offer unsecured loans. However, typically banks were offered larger amounts and better terms for secure loans. If you do have that type of collateral. And then lastly, we want to ensure that when we’re looking at that right bank, we’re putting ourselves in the best position to win.

So moral of the story, when you’re choosing your business banking relationship, we want to look at all things that this business banking relationship is going to offer us. And then try to stick with them for the longest amount of time possible. Personally, I would recommend going with Chase only because I know Chase. Once you do business with Chase, they do business with you, they’re conservative, but when they approve you, they’re going to approve you for higher limits, especially if you’re going to be keeping higher account balances. And then when you get chase private client, they really roll out the red carpet for you. Okay? So this is going to wrap up this particular module. I’ll see you in the next one.