5 Things Banks Want Before They Offer a Business Line of Credit
What Banks Look for Before Offering Business Credit Lines
Banks are in business to make money. If the business owner has a good understanding of this, it makes the banking relationship much easier and will work in the favor of the business owner. Often the business owner will have the paper work necessary, i.e., corporate paperwork, minutes, resolutions, drivers license, etc. and just wants to sign on with bank. The business owner may not understand why the bank is asking or trying to sell them a lot of unnecessary services when it seems to be a bother. Well the bank wants to sign up the business owner to 5 very specific things when starting the banking relationship.
Deposits helps a bank make more loans to others. Without deposits, loans would be next to impossible. So when signing up they will really push for deposits. There is now a trend to charge monthly fees for savings as banks try to be more creative with finding profits for their bottom lines.
A business checking account is really a low profit center for banks. However with the advent of higher overdraft fees, monthly fees for high volumes of checks and very low interest rates, the checking account is now seen as a profit center.
Bill Pay Service
Bill Pay Service is a service that enables a business to pay their bills by computer. This service is sold as a service to businesses but in reality it is another profit center for the bank. It may seem to be a convenience, but with convenience comes more fees.
The bank will try to link a card to a checking account because they know there will be a great temptation for a business to go over the amount in their checking or savings account. With that overdraft will comes another fee and the debit card becomes another profit center for the bank.
VISA/MasterCard Bank Card
Similar to the ATM/Debit card, the interest rates and usage of the VISA/MasterCard is another profit center for the bank. The business owner will pay fee for not only using the card, but any interest rates will have to be thought of as well. Credit cards are some of the highest profit centers for banks, outside of loans.
For the business owner, each one of these will also factor into the scoring banks use to determine if a customer is credit worthy. It may seem unfair, but if you want the banks money, you have to play by their rules.
This article was written by Charles White of Corporate Credit Builders, Portland, Oregon. He is one of the top small business credit specialists in the US with years of experience in consulting small businesses.