Business Banking E-Newsletter - December 2010

Automated Clearing House Processing

What it is and how it can help your business

With so many benefits, it is little wonder that most customers prefer to do business with companies that offer ACH payment processing.

Automated Clearing House (ACH) is the name of an electronic network for financial transactions in the United States. ACH processing is a highly reliable and efficient transfer system governed by the NACHA OPERATING RULES in USA, which provides for the clearing of electronic payments. In developed countries these rules and regulations are defined by different regulatory bodies of the country.

ACH processing is an electronic payment network used by individuals, businesses, financial and government organizations. ACH payment possessing can process large volumes of both credit and debit transactions which are originated in batches.

Uses of ACH Payment Processing 

  • Allows direct deposit of payroll, social security, other government benefits and tax refunds.

  • Direct payment of consumer bills such as mortgages, loans, utility bills and insurance premiums; 

  • Business-to-business payments;

  • E-checks; 

  • E-commerce payments;

  • Federal, state and local tax payments.

How ACH Processing Benefits Big Companies and Individuals

  • Cheap method of transaction - ACH Processing also saves consumers an average of $85 a year in postage and up to $30 a year in check costs

  • Efficient and Fast - More efficient alternative to paper checks. ACH payment processing simplifies your life by taking the hassle of paying the bills and saves time

  • Reduces Payment Processing Expenses - We don't need to pay high credit card fees because ACH payment processing offers the same convenience with dramatic savings

  • Better option - ACH payment processing is another suitable payment option to offer to the clients, customers and donors. With 10 million credit cards less US households online it is clear that the impact of electronic checks on our business will be significant

  • Credit Card less people not to be Neglected - ACH processing enables us to deal with those potential customers who cannot pay by credit cards

  • Increases in Cash Flow - ACH processing helps the big companies recover their money easily and in a short period of time. This impact of electronic checks helps to improve the credibility of a company and brings more business.

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Jump Starting Stalled Small Business Lending

In recent months President Obama has pressured banks to increase lending to small businesses in order to spur job growth. Now, a long-awaited program approved in the stimulus package last February is set to begin that could help make that happen by reassuring wary bankers with a new approach.

For the first time, the Small Business Administration will guarantee up to $3 billion in pools of banks' 504 loans sold into the secondary market. That way, if borrowers fail to pay, investors who bought the loans would be made whole by the government. The SBA expects the program to start soon but doesn't have a firm date, according to spokeswoman Hayley Matz. 504 loans give small businesses favorable financing to invest in fixed assets like property or machinery.

Commercial lenders have not been able to sell their portions of 504 loans since investors lost their appetite for asset-backed securities in the financial crisis, prompting many lenders to drop out of the 504 loan program. "In essence that market has not returned," says Kurt Chilcott, CEO of San Diego-based CDC Small Business Finance, a nonprofit that partners with commercial lenders to make 504 loans. "We've gone from at least half a dozen active players who were willing to purchase those loans to maybe half a player," he says. Because banks can't resell their loans, Chilcott estimates that 40% of the banks his firm used to work with have stopped making 504 loans.

Collateral Limits

Nationwide, 257 lenders that made 504 loans in the 12 months before Sept. 30, 2008, dropped out of the program the following year, a decline of 13%, according to the SBA. Loan volume dropped 28%, from $5.4 billion to $3.9 billion, in the same period. "If the bank wants to make these loans, they have to hold them on the books," says Bob Coleman, publisher of the Coleman Report newsletter on SBA lending.

That's a problem because regulators want banks to limit their exposure to the troubled commercial property market. "Most of your small business loans will be secured by some sort of commercial real estate. The regulators are asking us to reduce our concentrations in that," says Cynthia Blankenship, vice-chairman of Bank of the West, a community bank in Grapevine, Tex.

While the Small Business Administration guaranteed loans are a small piece of total credit to small businesses, they are growing more important as fewer companies hammered by the economy qualify for conventional loans. The SBA's 504 loans in particular fund expansion projects that are directly tied to jobs: Companies must demonstrate that one job will be created or retained for each $65,000 the SBA guarantees.

Borrowers in the 504 program pay 10% of a project's cost. The rest of the financing is split between two lenders: 40% from a nonprofit known as a Certified Development Company and 50% from a commercial lender. The government guarantees the CDC's portion, but private lenders have no such guarantee. Their loans are secured by the first claim on the property if a borrower fails to pay. The new program means SBA will guarantee 80% of commercial lenders' stake in 504 loans, which would let them pool the loans into securities and sell them to investors.

Risk on Principal

Even that 80% guarantee may not be enough to lure lenders back. The SBA will require banks to keep 15% of the loans on their books and pool assemblers—the companies that buy loans and package them into securities—to assume 5% of the risk. "They're not used to taking principal risk," warns Chris Crawford, president of the McLean (Va.)-based National Association of Development Companies, the trade association for CDCs that partner with banks in 504 lending.

If lenders and pool assemblers aren't willing to hold on to those unguaranteed pieces of loans, the program "could fall flat on its nose," he says.Last year's stimulus package bolstered the SBA's other main loan guarantee program, known as 7(a), by eliminating fees and raising government guarantees from 75% to 90% of the loan's value. Small banks often sell the guaranteed portions of their 7(a) loans so they can use the proceeds to make new loans. The market for those guarantees froze last year but has largely thawed, thanks in part to the Federal Reserve program known as the Term Asset-Backed Securities Loan Facility, or TALF, which provides investors attractive financing to buy securities backed by assets like credit-card debt, student loans, and small business loans.

TALF has supported purchases of $1.5 billion in SBA-guaranteed loans—both 7(a) and 504—since May, according to the Federal Reserve Bank of New York. The program is scheduled to expire in March. "Nobody really knows what will happen to the market once the TALF program disappears," says Bob Judge, a principal at Government Loan Solutions in Cleveland, which helps lenders and investors price SBA loan securities.

Less Incentive for Banks

No one is predicting the kind of paralysis that halted the market a year ago, when Judge says dealers selling pools of SBA loans might have been lucky to get one or two bids, compared with 10 today. But TALF's expiration could slacken demand and reduce the premium lenders get for their SBA loans, which in turn means less incentive for banks to make the loans to businesses. "You'll probably see a softening in the market at least temporarily," says Chris LaPorte, the head of government loan operations at Coastal Securities in Houston, one of a handful of firms that pools SBA loans into securities.

In addition, the increased guarantees and fee waivers that have helped revive 7(a) lending are set to expire at the end of February. The measures, supported by $375 million in stimulus funding, have already been extended once with an additional $125 million Congress approved after the initial funds ran out in November. Pending legislation would extend those enhancements to the end of 2010 and increase the maximum size of SBA loans from $2 million to $5 million for 7(a) loans, and from $4 million to $5.5 million for 504 loans. The bill would also let businesses use 504 loans to refinance existing commercial mortgages on more favorable terms.

For now, lenders are waiting to see whether the SBA's effort to unfreeze the market for 504 loans will allow more small business owners to invest in new property and equipment—and create jobs. "That lending has really been stymied and that's where they could really help," says LaPorte.

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5 Twitter Tips for Building Your Business

Twitter is a great tool for conversations, building community, finding brand advocates and reading the latest news. That’s why celebrities, athletes, your competitors—and hopefully you—are on Twitter.

The growth and usage of Twitter is not surprising. estimates approximately 21 million unique monthly visitors, and a quick search on Twitter yields a variety of conversations from music, sports, politics, events and products.

For business however, there’s an art to using Twitter, and the most successful at it follow an unwritten set of rules. The following are 5 important tips to follow on Twitter.

  1. Do Some Research - Research is fundamental. Small business owners should spend a few weeks understanding what types of conversations are happening on Twitter and then formulate a communications plan before actually engaging. This will help drive consistency in the messages shared on Twitter.
  2. Determine Your Goals - Not all businesses use Twitter the same way. Some, like @ComcastCares, use Twitter merely for customer support. Dell uses Twitter to sell products or share company-related information. Often, smaller, more local businesses use it to build relationships with their constituencies to drive customer loyalty programs.

    Whatever your goals are, it’s important to think about what you want to achieve with Twitter before spending your valuable time and resources on it.
  3. Specify Your Twitter Profile - There are many options you can use when creating a Twitter profile. You can create a company-branded account, a personal account or a hybrid account.

    Branded account: A branded account is simply where your Twitter name corresponds with the name of your company, and usually the avatar is your company logo.

    Personal account: A personal account is a little more human and unites your own personal brand with that of the company you work for or own.

    Hybrid account: A hybrid account usually takes different elements from both the branded and personal accounts.

    Every business is different, so whichever option you choose, there has to be a level of balance. Branded profiles are great for certain content; for example, industry news, contests, investor relations, etc. Personal profiles are more beneficial if your organization wants to leverage the employee’s personal micro-community or wants to have a more human presence.
  4. Build Social Equity - To be successful on Twitter, you have to build trust and credibility with your community. The end result is an increase in your social equity. That doesn’t always translate to the number of followers, tweets, or retweets you may have either. Rather, it’s more about developing a reputation as a trusted source of information or being seen as an expert in a particular subject.

    You won’t succeed in building your equity by pushing out one way marketing messages about your business. Instead ask questions, be personal, and engage people naturally within the community. Otherwise, customers won’t listen to what you have to say and your equity may even decrease.

    Buying Twitter followers is not recommended either. There are a lot of companies that will promise you thousands of followers for a very low price. The problem is that many of the followers will never read your content, click through to your links and they’re probably just bots spitting out a multitude of links. Besides, if it becomes public that you did purchase followers, you will be called out by the community and your reputation may be damaged.

    It’s not worth buying followers just to increase your “perceived” equity and influence because that’s all it will be, perceived.
  5. Track, Measure and Iterate - Any small- or medium-sized business may want to consider a paid tracking service like Radian6 or ScoutLabs to better track Twitter conversations, identify trends, measure sentiment and get a quantifiable snapshot of what’s going on in the social web.

    If you want to measure sales, you can simply use a tracking code or coupon code specific for Twitter that will help measure conversions. If you want to measure how much money Twitter has saved your company, you can track how many issues you resolved, leads you gathered, and dollars you saved through Twitter engagement versus traditional channels. If your goal is to handle customer support issues via Twitter, it’s wise to check if there are any decreases in the call volume to your customer support center.

    The great thing about using Twitter for your business is that it’s very easy to iterate your metrics and communications plan on the fly. It’s important, however, to remember that your plan should always map back to your goals and objectives so you don’t lose focus.

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10 Recession Proof Holiday Bonus Ideas

Creative, Cost-effective ways to give holiday cheer

With the economy like it is, I'm sure there are many entrepreneurs thinking that they just can't provide the traditional holiday bonuses to their employees. While few things can top an unexpected large check, that doesn't mean that the recession has to be entirely depressing. Employers should find creative, cost-effective ways of providing joy to their employees.

  1. Paid Time Off - All families value extra time together during holidays. Employers should offer half-day schedules to employees during the holiday season. If employees offer to double their work load during their shift and receive a full day's pay, everyone wins.
  2. Coupons - During a recession, every penny counts. Employers should search for discounts that will minimize the holiday bills. Coupons or savings cards are a great investment for anyone with an expensive shopping list. Discounted merchandise can not only guarantee enough gifts for everyone, but also a lower credit card bill.
  3. Barter System - Remember the cashmere sweater from Christmas 06 that you hated? It may be perfect for your co-worker's wife. Companies could set aside time to create a Barter System program for employees. They can bring in new, unwanted items and swap with co-workers. The trade-off: saving money and gas by avoiding shopping trips to the mall.
  4. Gas - Employees would love an opportunity to save money on fuel. How about carpooling? Nothing says holiday spirit better than the boss making rounds to pick up his employees and ensure a safe trip to work. Carpooling may not seem like much, but the extra savings can guarantee a gift under the tree.  It's a great way to get to get to know everyone, too.
  5. Holiday Feast - With the rising cost of food, many families are hoping to find alternatives to cooking throughout the season. Employers can have holiday meals catered and prepared for the company. The cost of a holiday meal is much cheaper than a typical bonus.
  6. Partnerships - Search through your Rolodex and you're guaranteed to find a business contact that could provide a service to your employees. A simple tune-up or dry cleaning bill could make or break someone on a budget. One phone call could complete a task that an employee has been putting off for months.
  7. Take Advantage of Your Company - Some employees could really use some pampering. Take the opportunity to seek out group rates for services such as spas and gyms. If you can recruit your entire company, you can lock in savings on services that can be used for the entire year.
  8. Give the Basics - In these times, nothing is more satisfying than the bare necessities. Employers could create gift baskets with personal essentials that every employee needs. Who would turn down lotion and tissue in a time like this? And by buying in bulk, you could save hundreds of dollars.
  9. Pay a Bill - The best holiday gift is to start the New Year with a clean slate.  Offer to pay a bill for each employee. This could be pretty successful as long as employees are reasonable. (Mortgages are excluded!)
  10. Play Santa - You can keep your employees satisfied by giving them their heart's desire. Spark up a conversation and ask every employee what they would like to receive as a gift. Most people will usually say something simple during a casual conversation. If your budget permits, buy it! You have proved that the guy in the corner office really does have a heart. 

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Improve Your Business

Put a plan in place to increase satisfaction

Customers are willing to spend more with companies that have great customer service. That common sense nugget is also supported by recent surveys by American Express of 12,000 consumers around the globe. More than 60 percent of U.S.respondents ranked great customer service as important, but only one-third believe they're getting it. Alice Bredin, author and small business adviser to AmericanExpress OPEN (AXP), says that small companies are missing out on the opportunity to deliver service that could differentiate them from larger competitors. She spoke recently to Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.

Karen E. Klein: Your survey says that Americans want great customer service but aren't getting it.

Alice Bredin: A majority of Americans feel companies either haven't changed their attitude toward customer service or are paying even less attention. Just 37 percent believe companies have increased their focus on providing quality service in the current economy.

Why the disparity?

Business owners, despite their best intentions, don't always know what it is that will most satisfy their customers. They might think it's price, when really it's personalized service, like customers being able to quickly find what they need in the store, or getting follow-ups and reminders.

I think a second reason is that business owners haven't put in place the systems and processes to ensure that they can provide ongoing service easily. Business owners in these challenging economic times are working more hours and having to lay people off. They're not as focused on things like service.

What do you recommend?

Find technology to help you monitor what customers are saying about you. Sign up for services that will alert you when someone online is mentioning your company, like Google Alerts or TweetBeep.

Make sure you're reaching out to customers on a regular basis and making it really easy for them to tell you how they feel. Put something like SuggestionBox or IdeaScale on your website to encourage online feedback. There's no excuse now for not knowing what your customers are thinking about you.

What do you do with a complaining customer?

Make sure that the problem gets fixed and they are happy. If the owner is there when the problem comes up, the customer probably leaves feeling happy. If the owner's not there, that satisfaction may not happen. So you have to communicate with your employees about how important it is that customers are really happy about doing business with your company.

It's not easy to give good customer service consistently unless you train your people. They should know how to listen to customers without speaking until the customer is done. If the customer is not happy with whatever the employee suggests, they should get a manager, and the manager should turn to the owner if need be. These incidents should be tracked, with follow-up, and everyone knowing the ultimate outcome.

How does a small company make superior customer service part of its reputation?

You need to make sure you're talking about your great customer service and selling your service or products on that fact. You can encourage your satisfied customers to share their experiences with friends or on sites like Angie's List or Yelp. Offer a free class or a discount to anyone who writes something nice about you someplace like Google Local Business Center. Make an ongoing effort to get other people evangelizing for you.

There were a couple of other interesting findings in your survey. One is that people said they were more inclined to talk about good experiences than to complain about bad ones. That goes against conventional wisdom.

Yes, three-quarters said they are likely to speak positively about a good business but 59 percent said they would complain about a bad one. People actually like to tell their friends about a good company and they like to recommend places to people. Maybe that finding also reflects the fact that there are so many outlets now where people can share experiences.

But another finding is that your survey respondents said they are skeptical about feedback they see online. Maybe they suspect that good reviews are planted.

They told us that they put greater credence in negative reviews on blogs and social networking sites than they do on positives ones. This just highlights the power of the Internet to influence opinions about your business. So if someone's unhappy and they're talking about it online, you need to directly reach out to that person and you may need to go into the discussion yourself and talk about what you've done to fix the situation.

An unhappy customer presents a great opportunity to learn about what you can do better as a business owner. And maybe you can turn that person into a happy customer and maybe even an evangelist for your brand.

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