BUSINESS BANKING & CREDIT 101

Provided By: Contact Specialist Group (CSGEAST.COM) “Providing Solutions To Build Better Businesses.”One of the most fundamental aspects of Business Operations and Management is establishing a Business/Corporate Banking Account. The process of setting up a Business/Corporate Bank Account is a vital preliminary step in building a solid foundation for your business. However, despite the relative simplicity and importance of opening a Business/Corporate Account, at CSG we notice that many business owners fail to take that step.Not having a Business/Corporate Banking Account (separate from your personal account) can have immediate and long term adverse consequences for your business. Commingling Funds from your Personal Banking Account(s) with the funds from your Corporation, LLC, Non- Profit Organization, or LLP is a violation of the law governing these business entities and could result in a Court dissolving your business. The legal term for this process is called Piercing The Corporate Veil.Starting A Business/Corporate Banking Account is a simply process:1. Obtain A Tax Identification Number/Employer Identification Number (EIN):A Tax Identification Number or Employee Identification Number (EIN) is often referred to as a business’ Social Security Number. The reason for this comparison is because like an individual’s Social Security Number, a Tax Identification Number/EIN is a unique nine digit number used for identification, to apply for credit, open a bank account, and file taxes.The IRS provides four (4) simple ways to obtain a Tax Identification Number/EIN:A. VIA TELEPHONE1. Visit http://www.irs.gov/pub/irs-pdf/fss4.pdf and obtain a REQUEST FOR TAXPAYER IDENTIFICATION FORM (SS-4 Form).2. Complete the form.3. Call 1-800-829-4933, the office hours are Monday to Friday from 7:00 am until 10:00pm.4. The IRS Representative will take the information over the phone and provide you with a Tax Identification Number/EIN at the end of the call.B. VIA INTERNET1. Visit the IRS Website at https://sa1.www4.irs.gov/modiein/individual/index.jsp2. Complete the application process.3. The Tax Identification Number/EIN is issued immediately.C. VIA FACSIMILE1. Visit http://www.irs.gov/pub/irs-pdf/fss4.pdf and obtain an SS-4 Form.2. Complete the form.3. Visit http://www.irs.gov/localcontacts/index.html to obtain the fax number for your local IRS Office.4. Be sure to include your fax number so that the IRS can fax your Tax Identification Number/EIN back to you.5. This process will typically take up to four (4) business days.D. VIA MAIL1. Visit http://www.irs.gov/pub/irs-pdf/fss4.pdf and obtain an SS-4 Form.2. Complete the form.3. Visit http://www.irs.gov/localcontacts/index.html to obtain the address for your local IRS Office.4. This process will typically take up to four (4) weeks.2. Obtain a copy of your Business License or Business Filing Receipt.a. You can obtain your Business License from the Business Licensing Department for the City in which you live.b. Filing Receipts are issued by the Secretary of State, Division of Corporations, or the governmental agency in your State that is responsible for approving the filing of Corporations, LLCs, LLPs, and Non-Profit Organizations.3. Contact a Banking Representative in the New Business Accounts Department of your bank.a. Make an appointment to visit and start your Business/Corporate Account.b. Be sure to bring your Tax Identification Number/EIN and your Business License or Filing Receipt.c. Ask the Banking Representative if you need any additional documents. Some banks may require a copy of your Corporate Bylaws, Operating Agreement, or a list of all the Partners in your business.We recently interviewed the Assistant Vice-President for Small Business Banking for JPMorgan Chase for our new book, From Servant To Master: An Entrepreneurs Guide to Obtaining Wealth and Independence. This is an excerpt from the interview:CSGEAST.COM: Do Corporate/Business Accounts provide a feature similar to the Overdraft Protection that is available for Personal Checking Accounts?VP, CHASE BANK: Business/Corporate Accounts have an Overdraft Protection component. However, that feature is not part of the basic account and is based upon credit approval.CSGEAST.COM: Are there various levels of accounts (Gold/Platinum/Premium) within the structure of Corporate/Business Accounts?VP, CHASE BANK: Yes. The level that a business receives is based upon several factors which include: (1) The type of business, (2) The anticipated volume of activity that a business will conduct (check writing, number of transactions, and business needs), and (3) the Average Daily Balance (ADB) that a business maintains is also a major factor.CSGEAST.COM: What are the daily balances that distinguish a Basic Business Account from a Premium or Platinum Account?VP, CHASE BANK: A Premiere Account requires an Average Daily Balance of $25,000.00 and a Platinum Account requires an Average Daily Balance of $75,000.00.CSGEAST.COM: Are there penalties if a business fails to maintain those Average Daily Balances?VP, CHASE BANK: Yes, there are Monthly Fees that are incurred if a business fails to maintain the required Average Daily Balance.However, those balances are not required for all accounts. We have accounts for new and small business that may only require a Daily Average Balance of $200.00. We work with our clients to establish an account that works best for them at their current level of business.Clients can also change the type of account that they have at anytime to avoid Monthly Fees.CSGEAST.COM: How long does it take after the business owner has provided you with the Tax Identification Number/EIN and the Business License, Filing Receipt, or Business Certificate before the account is open and they can began to make transactions?VP, CHASE BANK: The account is open and ready for transactions immediately. In fact, the rules regarding opening an account at Chase have recently been updated. A business owner is no longer required to have a Business License, Filing Receipt, or Business Certificate at the time they open the account. The business owner only needs to have their Tax Identification Number/EIN.The only exception to this rule is if you have formed a Limited Liability Partnership (LLP) or Non-Profit Organization 501(c) (3). In the case of an LLP, we require the list of the Partners and the different signers for the account. For a Non-Profit Organization claiming Federal Tax Exemption we require the Certificate of Exemption which is issued by the Internal Revenue Service.CSGEAST.COM: Are there supplemental Credit Cards and Lines of Credit that are available with Corporate/Business Accounts?VP, CHASE BANK: Yes. These additional services are available and are based upon the client’s credit approval. If the client qualifies these additional funds are made available to the client immediately.CSGEAST.COM: Please explain what “qualifications” an individual business owner would need to qualify for the additional Credit Cards and Lines of Credit?VP, CHASE BANK: Typically, if the client is serving as a Personal Guarantor for the business, they will need a credit rating of 780 or above.CSGEAST.COM: Many Small Business Owners are concerned about cash-flow. Cash-flow concerns are directly affected by holds that may be placed on checks and other funds. Are there products that Chase offers to businesses to assist in expediting the processing of checks and payments from clients?VP, CHASE BANK: Yes, we offer a Business Management Account which is designed with those small business concerns in mind. We provide the business owner with a portable check processing machine and a credit card processing terminal for their office. The business owner can scan their client’s checks and the funds are deposited into their account instantly.CSGEAST.COM: What are some of the various business loans that are available to new and small business at Chase?VP, CHASE BANK: If the business has been in existence for less than two (2) years we can assist the business with securing a loan through the Small Business Association (SBA). If the business is older than two (2) years Chase will make the loan.CSGEAST.COM: Do these loans require that the business owner sign on as a Personal Guarantor?VP, CHASE BANK: Yes, in most cases.CSGEAST.COM: Are businesses required to produce collateral (equipment, property, etc.) in order to secure a loan from Chase?VP, CHASE BANK: It depends on the business and the amount of the loan. If the business is seeking a loan in excess of $100,000.00 then typically some from of collateral is requested. For loans under $100,000.00, meeting the credit qualifications is typically sufficient.CSGEEAST.COM: What are the processing times to apply and receive an answer for loan approval?VP, CHASE BANK: For businesses that are older then two (2) years that are applying for a loan from Chase, we can have an answer within 24 to 48 hours after the business’ application is completed.CSGEAST.COM: What are some of the common mistakes that you notice entrepreneurs and small business owners making in regards to banking?VP, CHASE BANK: I notice that many business owners commingle funds. They combine the money from their personal accounts with their business accounts. This is a major mistake. Clients should follow the steps that we have discussed and establish a separate business account.Also, clients should be careful about the manner in which they manage their accounts. That means limiting the number of NSFs.This is extremely important within the first two years when you are working to establish the company’s credit rating so that the company can begin to apply for credit on its own without a Personal Guarantor.CSGEAST.COM: Given the current state of the economy, have you notices a trend with banks and lenders becoming more stringent as it pertains to loan requirements?VP, CHASE BANK: Yes, we are notices that the requirements placed on credit scores and Debt-to-Income-requirements are becoming more stringent.CSGEAST.COM: Thank you for the valuable insight.VP, CHASE BANK: Sure. We look forward to helping you clients.© 2008 Contract Specialist Group. All Rights Reserved. CSGEAST. COM

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