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Business Banking Services

artici ant Guide

BBVA Center for Financial Education

Copyright 2018 EVERFI, Inc. 2

Table of Contents

Choosing a Financial Institution .................................................................................................. 3Common Types of Accounts ....................................................................................................... 4Account Insurance ....................................................................................................................... 5Opening a Business Account—Document Checklist ................................................................... 6Online, Mobile, and Remote Banking Services ........................................................................... 7Using Business Debit Cards Effectively ...................................................................................... 8Using Business Credit Cards Effectively ..................................................................................... 9Scenarios .................................................................................................................................. 10Merchant Processing Services .................................................................................................. 11Building a Good Relationship with Your Financial Institution .................................................... 12What Is Important to Me? .......................................................................................................... 13My Business Banking Needs ..................................................................................................... 14


Choosing a Financial Institution

Best Practices

• Ask a branch manager or business loan officer at a few financial institutions in your neighborhood to recommend business accounts or services that might be useful for your business.

• If you already have a good relationship with a financial institution, stick with that institution. • Ask other small business owners for their recommendations. • Review the financial institution’s fees and interest rates. • Make sure that the financial institution is insured.

o Banks should be insured by the Federal Deposit Insurance Corporation (FDIC). Go to https://www.fdic.gov to learn more.

o Credit unions should be insured by the National Credit Union Association (NCUA). Go to https://www.ncua.gov to learn more.


Common Types of Accounts

Best Practices

● Do not use your business account to make personal transactions and vice versa. ○ When transferring funds from a business account to a personal account, ensure that

you write a check to yourself or request the financial institution to process a transfer. ● Review statements from your financial institution regularly and report suspicious

transactions immediately. ● Shop around for the best Annual Percentage Yield (APY) on accounts, lowest fees, and

other features such as free checking. ● Ensure that your financial institution is:

○ Suited to your business’s unique needs. ○ Experienced in servicing small businesses. ○ Insured by the FDIC or NCUA.

Choosing Your Account Services

Choosing which type of accounts to open will depend on the types of services you need, as well as knowing what stage of growth your company is in. Here are some of your options:

• Checking Accounts: o Small Business Checking Account

o Commercial Checking Account

• Savings Account

• Money Market Account

• Certificate of Deposit

• Payroll Account

Speak with a representative of your financial institution to learn more about account

options.


Account Insurance

Review the chart below to identify insurance that typically protects various account types.

Type of

Account Sole

Proprietorship Fiduciary

Account Employee

Benefit Account

Corporation,

Partnership,

Unincorporated

Association

Account Definition Account owned

by a single individual

An account that processes other people’s money, e.g., escrow, IOLTA, agency, or property management

Account that covers health, welfare, and retirement plan for employees, e.g., 401(k)

Account owned by a corporation, partnership, or unincorporated association

Insured by FDIC FDIC FDIC FDIC Insured up to $250,000 $250,000 $250,000 $250,000 To Qualify Your company

must perform a service and be formed for a purpose other than acquiring insurance coverage.

You must provide documentation that you are the caretaker of funds that belong to a principal owner other than you.

Investment decisions are made by plan administrator.

Your company must perform a service and be formed for a purpose other than acquiring insurance coverage.


Opening a Business Account—Document Checklist

Review the chart below and identify documents you may need when opening accounts for your type of business.

Type of

Organization

Sole

Proprietorship Partnership

Limited Liability

Company Corporation

Unincorporated

Association,

Social

Organization, or

Club

Definition Owned by a single individual

Owned by two or more individuals

Owned by an individual or partners with limited liability

Owned by a person or group with a separate identity of its own, and the same rights as an individual

Owned by two or more individuals

Necessary

Documents

Social Security Number or Business Tax ID Number Two forms of identification: one government-issued ID, such as driver’s license or passport, and one other, such as a credit card or utility bill Some states require Business Documentation, such as a DBA (not Texas)

Business Tax ID Number Partnership Agreement Certificate of Assumed Name

Business Tax ID Number Articles of Organization Corporate Resolution

Business Tax ID Number Articles of Organization Corporate Resolution

Business Tax ID Number Articles of Association (if available)


Online, Mobile, and Remote Banking Services

Online Banking: Anytime you access your banking services via the internet, you are taking advantage of online banking. Mobile Banking: Using your phone or other mobile devices such as tablets to access banking services is a type of online banking. Remote Banking: You can use an array of services designed to let you manage your accounts and get help from bank employees from anywhere, as well as automated services.

• For example: Lockbox services allow you to: o Set up a unique address for your business. o Receive payments directly to this address from customers and clients. o Have the security of the bank processing payments and recording transactions

for you. Benefits of Online, Mobile, and Remote Banking

• Process payments and transfers quickly. o Transfer funds via direct deposit, Automated Clearing House (ACH), and credit

processing. o Wire transfers to vendors and other businesses. o Pay employees via payroll services.

• Access front and back of checks in case of disputed payments or lost checks. • Remote Deposit Capture (RDC) is a system that allows you to:

o Scan or take photos of checks. o Upload them to your bank account to deposit. o Use a high-speed scanner, if possible; if you receive a lot of checks ask your

bank if it can issue you a high-speed scanner. o Access funds quickly; checks may be processed in two days. o Deposit checks at your convenience.

Best Practices

● Talk to your financial institution about steps you can take to protect your identity and avoid fraud.

● Set up varying levels of access for employees who are authorized to view or access your business account.

● If your business processes many checks per day, an RDC may be useful. RDCs can scan or take photos of hundreds of checks and upload them directly to your account. For such a high volume of checks, mobile deposits or in-person deposits may not be practical.

○ Keep checks even after you deposit remotely in case of disputes. ○ Dispose of all old checks and documentation safely. ○ Endorse all checks before scanning and submitting.


Using Business Debit Cards Effectively

Review this chart to help determine whether using business debit cards is the best decision for various transactions.

PROS CONS

Only spend money that you have.

Could deplete or jeopardize your account balance.

Limited fraud protection, especially if money is withdrawn directly from ATM.

Access cash from ATMs.

Your financial institution may not have enough ATMs that are convenient to you.

Fees for withdrawing funds from ATMs that are not affiliated with your bank.

Protect your card and account with a PIN.

Using a credit card allows you to track your small expenses in one place.

Other authorized users may require access to PIN to use debit card.

Lower fees than credit cards. Does not build credit history.

Avoid interest on payments.


Using Business Credit Cards Effectively

Review this chart to help determine whether using business credit cards is the best decision for various transactions.

PROS CONS

Can add key personnel as “authorized users” and track their expenses.

Authorized users are not responsible for paying the bills.

Can assign credit limits for authorized users. Mishandling a business credit card account may negatively affect your business and personal credit report.

Keeps your personal expenses separate from your business expenses.

Fees and interest rates may be high.Robust rewards programs.

Can qualify for higher credit limits than personal credit cards.


Scenarios

Knowing whether to use a business debit card or a business credit card can be tricky. Look at a few scenarios. Scenario 1 You own a neighborhood self-service laundry. A few minutes ago, one of your customers informed you that you were out of creamer for your coffee machine. Would you use a business debit card or a business credit card? Scenario 2

You own a small framing shop. You’ve had a great month in sales, but money is a little slow coming in to your account. You’ve paid most of your bills and are almost at your minimum required balance on your account. An employee alerts you to a great deal on packing boxes that you’ve been meaning to buy. Would you use a business debit card or a business credit card?


Merchant Processing Services

Merchant processing services are bank services that allow a business to process various types of payments and transactions. Merchant processing services can address a wide array of your business needs. Processing services allow you to process many transactions, including:

• Credit or debit card payments from customers. • Automatic transactions. • Cash advances.

Important note on merchant processing services: If your business accepts credit card sales from customers, you will likely pay a processing fee. This fee is usually between two and three percent. If you are considering opting out of letting your customers pay by credit card, consider the cost to your business. Seek a provider with negotiable fees.


Building a Good Relationship with Your Financial Institution

Best Practices

• Find a bank representative who has a track record of helping small businesses. • Educate yourself:

o Learn the basic services a bank offers. o Be prepared to answer questions about your business and its ongoing financial needs.

The more you know about your business, the more effectively a bank representative will be able to serve you.

• Network:

o Seek appointments with a bank representative at your bank before you need a loan. o Ask your bank representative for advice on services, products, and offers tailored to

help your small business. o Go to business networking events where financial institution representatives will likely

be present.

WHAT’S IN IT FOR YOU? WHAT’S IN IT FOR YOUR FINANCIAL

INSTITUTION?

Representatives are customer advocates as well as representatives of their financial institution.

Better relationships mean loyal and long-term customers.

Receive a pricing advantage for having your entire banking relationship in one place.

Better rates for you translate into more business and more money for your financial institution in the long term.

Receive better financial advice and long-term planning perspectives.

Providing a personalized experience means customers are more likely to recommend the financial institution to their network.

Focus your financial management by having one point of contact for all your information.

Better customer service.


What Is Important to Me?

Check off the services that are important to you when choosing a financial institution.

c ATM Locations c Automatic Bill Payments c Currency Exchange Services

c Interest-Bearing Accounts c Experience with Small Businesses c Fees

c Free Checking c Interest Rates on Loans c Language Options c Multiple Account

Ownership c Online/Mobile Banking c Phone Banking

c Branch Locations Near Me c Ramp Accessibility c Check Clearance Periods

c Transaction Restrictions c Other

What other factors are important to you? Take notes in the space below:


My Business Banking Needs

Which of these services would your business benefit from? Categorize them according to how important they are to you. Add more services and products as you learn about them. This worksheet will help you plan for your current needs and predict your potential needs in the near future.

BANKING SERVICE NEED TO HAVE NICE TO HAVE DON’T NEED

Business Credit Card

Business Debit Card

Business Line of Credit

Certificates of Deposit

Commercial Checking Account

Good Customer Support

Lockbox Services

Merchant Processing Services

Mobile Banking

Online Banking

Overdraft Protection

Payroll Account

Payroll Services

Remote Deposit Capture

Small Business Checking Account

Savings Account

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