It is no secret that obtaining credit is especially challenging for businesses in this market of fewer lending sources and stricter requirements. In addition, finding new ways to maximize the efficiency of cash flow is more important than ever.
If a business owner is considering a new loan, a key factor is taking the time for thorough preparation and documentation. Include detailed background on the business and performance – past, current and financial projections for the next three years. If the business’ trends are down, include specifics on the steps being taken to improve the situation.
For new equipment purchases, businesses may also find a solution with significant benefits in leasing by talking to their banker and tax advisor about provisions in the American Recovery and Reinvestment Act of 2009 (ARRA 2009). Through this legislation, companies may cut their 2009 tax bill and at the same time, free up cash in the near term. The ARRA provides an additional 50 percent first year bonus depreciation, and expense limits have been increased $250,000 if total purchases are not above $800,000. Eligible equipment ranges from computers and printing equipment to telecommunications, transportation, office, industrial, construction, and medical and dental practice equipment.
To maximize cash on hand, businesses should also look to their banker and their bank’s cash management advisors to make sure they are using services that will increase efficiency. Remote deposit capture service allows a business to use a bank-supplied scanner to deposit checks into accounts immediately without losing time waiting to get to the bank. Online banking makes it easier to transfer money between operating and money market accounts to maximize interest earnings. Many banks also offer “Positive Pay” service to help protect business accounts from potential fraud loss.
Last, as FDIC insurance limits have changed, businesses should review all the available options for FDIC coverage. For example, under the FDIC’s Transaction Account Guarantee Program, all non-interest bearing transaction accounts of Bank of Nevada and other participating banks are fully guaranteed by the FDIC for the entire amount in the accounts through December 31, 2009. This includes all non-interest bearing accounts, IOLTA (Interest On Lawyers Trust Accounts) and NOW accounts that have an interest rate of 0.5 percent or less.
Another protection being offered is additional FDIC insurance for money market accounts as well as certificates of deposit through the WALTree program. Businesses can insure up to $1,250,000 – five times a single bank’s coverage – through the five affiliate banks of the bank’s parent company, Western Alliance Bancorp. A number of banks, including Bank of Nevada, also offer additional FDIC insurance through the CDARs program (Certificate of Deposit Account Registry) which provides depositors with additional FDIC coverage through the distribution of certificates of deposit funds to other participating FDIC insured banks.
Lastly, businesses need to monitor the condition and viability of their financial institution by staying current on capital levels and other key metrics that affect financial institutions’ strength. Having a strong relationship with the business’ banker has never been more important in helping businesses navigate successfully through these challenging times.
