The bank official who reviews the loan request is focused on repayment. Most loan officers request a copy of your business credit report to determine your ability to repay.
The lending officer will consider the following issues while using the information you provided and the credit report:
- Have you invested at least 25% or 50% of savings or personal equity into the business for the loan you are requesting? (Keep in mind that 100% of your business will not be financed by an investor.)
- Do your work history, your credit report and letters of recommendation show a healthy record of credit worthiness? This is a key factor.
- Do you have the training and experience necessary to operate a successful business?
- Do your loan proposal and business plan document your knowledge of and dedication to the success of the business?
- Is the cash flow of the business sufficient to make the monthly payments on the requested loan?
The following main points should be contained in a good loan proposal:
General Information
- Reason for the loan: the exact purpose of the loan and why it is necessary.
- Amount needed: the specific amount needed to reach your goal.
- Business name and address, names of officers and their social security numbers.
Description of Business
- Describe the type of business you have, its age, current business assets, and number of employees.
- Structure of ownership: describe the legal structure of the company.
Management Profile
- Prepare a short statement that is focused on each principal in your business; give details about education, background, accomplishments and skills.
Market Information
- State clearly the products of your company as well as its markets. Name the competition and explain how you plan to compete in the market. Describe what the business will do to satisfy the needs of its customers.
Financial Information
- Submit your own personal financial statements as well as those of the principal business owners.
- Financial statements: the income statements and balance sheets for the past three years. If you have a new business, provide the projected balance sheet and income statement.
- Specify the collateral that you are able and willing to give as security for the loan.
Keep in mind that banks are always required to notify you of the fees for their accounts. The best account to choose is usually the one with the lowest fees, regardless of the interest rate.
Keep an eye out for potential extra charges when shopping for checking accounts. Ask about monthly fees, check processing fees, and ATM fees. Also be wary of cost-free checking accounts, as the bank may charge you if your balance drops below a certain amount. Also, the charges for printing new checks can often be much higher at your bank than through an outside printing provider.
In this day and age, it doesn’t really benefit you to put money into an old fashioned “passbook” savings account. Often monthly account fees overshadow the small amount of interest you will earn. Instead, put your money into a checking account. If it is a larger sum, look into a money market account. In this type of account you will earn more interest than in a savings account, but watch out for additional charges if your balance drops too low.
Checking Accounts
Checking accounts provide you with quick, convenient access to your funds. You are able to make deposits as often as you wish, and most banks provide you with an ATM card to access your funds, or to charge debits at stores. Of course, you can also use the conventional method of writing checks.
Some checking accounts pay interest. These are called negotiable order of withdrawal (NOW) accounts. The more commonly used type, a demand deposit account, does not pay interest.
There are several fees that are associated with checking accounts, other than the check printing fees. These will vary depending on the bank you choose. Some will charge a monthly maintenance fee regardless of your balance, others will charge a monthly fee if your balance drops below a certain point. Further, some institutions charge you based on the transactions you make, such as each ATM withdrawal, or each check you write.
Money Market Deposit Accounts (MMDA)
An MMDA is basically an account that accumulates interest. You can also write checks from it. The rate of interest is usually higher than that of checking or savings accounts. However, they require a higher minimum balance in order to earn that interest. The higher your balance becomes, the higher your interest rate may rise.
However, it is less convenient to withdraw money from an MMDA than it is from a checking account. You are limited to six transfers from the account a month, and only three of these can be through writing a check. Also, there are usually transaction fees associated with these accounts.
Savings accounts
You may make withdrawals from savings accounts, but there is less flexibility than with a checking account. Like an MMDA, the number of withdrawals or transfers may be limited.
There are a few different types of savings accounts. The two most common are passbook and statement. Passbook accounts involve a record book that tracks all deposits and withdrawals and must be presented upon making these transactions. With a statement savings account, you are mailed a statement showing all withdrawals and deposits.
Minimum balance fees may also be charged on savings accounts.
Credit Union Accounts
These accounts are similar to those of banks, but with a different title. In a credit union, you would have a share draft account (a checking account), a share account (savings account), or a share certificate account (certificate of deposit account).
The great thing about credit unions is that they usually charge less for banking services than banks do. If you have access to one, use it!
Certificates of Deposit (CD)
CDs are time deposits. They offer a guaranteed rate of interest for a specified term which can be as short as a few days or as long as several years.
When you pick the term you generally can’t withdraw your money until the term expires. In some cases the bank will let you withdraw the interest you have earned on the CD. Because CDs are for a set amount of time, the rate of return is usually higher – and the longer the term, the higher the annual percentage yield.
A penalty can be issued if you withdraw your funds before the maturity of your term. Sometimes the penalty can be quite high, eating into your interest earned as well as your principal investment.
Your bank will notify you before your CD matures, but often CDs renew automatically. You should keep track of your maturity date if you would like to take out your funds before the CD rolls over into a new term.
There are several features of accounts you should investigate at various banks.
Interest Rates
- Find out what the interest rate is and whether the bank can change it after the account has been established.
- Also, find out if the bank pays different interest rates based on how much you have in the account, and if so, how it is calculated.
- Ask when the interest starts being compounded (when they pay you interest based on your principal plus your earned interest).
- Ask what the annual percentage yield is. This is a rate that will tell you how much interest you will earn on a deposit.
- Ask the minimum balance required before you start earning interest.
- Ask if you start earning interest when you deposit a check, or when the check is actually credited to the institution.
Fees
- Ask if you will pay a flat per-month fee.
- Find out if there is a penalty fee for dropping below a minimum balance.
- Ask if there is a charge for each deposit or withdrawal and how much.
- Inquire about ATM fees: making deposits, withdrawals, and how these fees vary if you use an ATM owned by the bank.
- See if there is a charge for bill payment by phone or online.
Additional questions:
- Will I be charged per check I write?
- Will my fees be reduced if I have multiple accounts with the bank?
- Will fees be waived if I use direct deposit?
- Is there a fee for canceling a check?
- Is there a fee per balance inquiry?
- Will there be a fee if I close my account soon after it is opened?
- Am I charged a fee if I write a check that bounces?
Limitations
- Find out if there is a limit to the dollar amount of withdrawals or frequency of withdrawals.
- If you close the account before your interest is credited, ask if you will still receive that interest.
- Find out how long it takes a check to clear, and how long you must wait to withdraw funds you have credited to your account.
CDs
- Establish the term of your account.
- See if the account will roll over automatically, and see if there is a grace period in which you can withdraw your funds after your term comes to maturity.
Yes. Here are some tips on how to approach this:
- See what your fees and charges have been over the past 3 years.
- Write down your checking needs, i.e. how many checks you write a month, how many ATM visits, how many deposits, how many times you have overdrawn, how often you go below the minimum balance.
- Take this info and do some research into other banks in the area. Compare their rates and fees to your bank.
- Go to your bank and ask to speak to a manager. Tell them you want to reduce your banking costs. If they don’t negotiate, bring up their competition. If they don’t want to lose your business they will negotiate. Also ask them other ways to cut costs.
- Keep in mind that many banks offer free checking to seniors, students, and the disabled.
- Don’t rule out smaller banks as they may be more willing to cut your costs just to get your business.
This is a federal law that requires depository institutions to inform you of the following:
- Annual percentage yield and interest rate
- Costs, fees, extra charges
- Other info including minimum balance requirements
Because of this act, you will get a disclosure of all this info from the bank you are opening an account with. This act also requires that banks provide you with this info upon request.
The Act also requires that interest and fee information be provided to you in periodic updates, and that if you have a rollover CD, you will be notified before the maturity date.
The costs associated with getting a home equity loan are basically the same as a refinance.
- Appraisal
- A non-refundable application fee
- Up front points, which equal one percent of the entire credit limit
- Closing costs, which are the same as the closing costs you would pay upon purchasing a home
- Yearly fees and the possibility a transaction fee per draw
These interests are deductible, some fully, some partially:
- Education-related interest
- Business interest
- Investment interest
- Mortgage interest
There are a variety of electronic transactions one can execute:
- ATMs allow you to bank electronically, get cash, make deposits, pay bills, or transfer funds between accounts. These machines are used with a debit or ATM card and a personal identification number.
- Point of Sale Transactions. Some ATM cards and debit cards can be used in stores to charge merchandise. Money is electronically drawn from your account and paid to the store.
- Pre-authorized transfers. This is allowing for the automatic deposit of fund or withdrawal of funds to or from your account. For example, one can authorize the direct deposit of wages, social security, or dividends directly to their account. You can also pre-authorize your bank to make automatic transfers for bill paying.
- Telephone transfers. You can transfer funds from one of your accounts to the other, or order bill payments over the phone.
- Most ATMs provide you with a receipt for the transaction, as do point of sale purchases. These receipts are the records of your electronic transactions and should be kept. Additionally, your periodic bank statement will show all the electronic transfers performed. This monthly statement is your proof of payment to another party and is your record for tax and other purposes. Any inconsistencies can be taken up with your bank.
Call your bank as soon as possible, or within 60 days of the error. They may ask you to submit your account information and the alleged error in writing. Generally they have 10 business days to investigate the error, and if they fail to come up with an answer your funds should be reimbursed. If the funds in questions were withdrawn from a point-of-service debit or a foreign electronic transfer, the bank may be allowed more time to investigate the error. In the meantime, however, you should have full access to the funds in question.
Your bank should notify you immediately of their findings. If you were correct about the error, they must immediately finalize the re-credit to your account. If there was no error, they must present in writing the findings of their investigation, and notify you of any funds they have deducted after you had been re-credited.
It’s important to note the difference in how you will be reimbursed for credit cards vs. ATM or debit cards. For a credit card your loss is limited to $50.
However, for an ATM or debit card the loss is limited to $50 if you notify your institution within 2 business days after the card is lost or stolen.
Keep in mind that the loss could be up to $500 if you do not tell your bank within two business days of the loss or theft.
If you do not report unauthorized transfers within 60 days of your statement being mailed to you, you run the risk of having unlimited loss on transfers made after the 60 days.
Yes, there are plenty of ATMs all around the world, but it is wise to check beforehand. With Visa and MasterCard, you can pinpoint ATM locations worldwide on their website.
Often it is a good idea to travel with an ATM card because you can withdraw foreign currencies at a better exchange rate, and also if you lose your card and report it promptly you will not experience the type of losses you would with cash. Be wary of fees your bank will charge you for each withdrawal – it may be wise to withdraw larger sums to minimize the frequency of transactions.