Business Aspects to Consider in a Financial Review

If you are a business owner, your company is as important as your health. Because of this, it is also essential that you conduct a regular review with a reliable banker of your company’s financial situation as religiously as you visit the doctor for medical consultation.

Reviews of your business’ finances are important for your company especially with the constant changes and developments in a business. This will ensure that your business has the right services and products for your customers. It will also help you making the decision to take a new loan or credit line for expansion. It is also beneficial before making repairs or buying new equipment. Business improvements are a great way to keep attracting both new and old customers.

But, what are some of the aspects that you must look at when conducting a financial review? Here are the main ones:

1. Loans and Credit Lines
Regardless if your business needs a new loan or not, it is still best to ask the bank of the different loan types and credit lines they can offer. Find out if there are loans specifically for purchasing equipment, real estate, leases or construction. Also, if you own a small business, you may want to find out if it provides Small Business Association loans because this can free up cash flow if you are eligible. Establishing a credit line is also a good business practice.

2. Convenience Banking
Determine if the bank has an online banking system that is easy to use, safe and convenient. Also, find out if the bank’s system can meet your business’ daily banking transactions. Familiarize yourself with the website to know the types of programs they provide.

3. Managing Treasury
You must review financial statements with your banker to know the possible improvements that you can do with your business and to find out where you can save money. You may also want to check the kinds of treasury management services the bank provides like remote deposit, check imaging, fraud prevention or lock box.

4. Business Relationship with Bank
Finally, evaluate your relationship with the bank. Ask yourself if the bank knows your goals and understands your business. Think about the type of relationship you have with the bank if you can consider it as a good one. Assess if you can trust them with your business. Choose a banker that gives time to know your business and understand it thoroughly.

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With the historically low rates, different financial institutions such as mortgage servicers, credit unions and banks are doing everything to encourage you to refinance. Before choosing one, make sure to know how long it will take.

Wells Fargo is sending out solicitations through mail showing the difference in their customers’ payments when they decide to refinance to a lower rate and shorter term loan.

Chase is going a little further than Wells Fargo. They are providing their customers with one day air informing their customer that they promise no closing costs and no appraisal for refinancing.

Advantis Credit Union offers their clients a 10-year mortgage that has a low interest rate of 3.29%. It has already given out 200 of this loan type since the month of January.

OSU Federal Credit Union has a raffle program that allows anyone who refinances their home, credit card or vehicle to join. The program will be giving out three cash prizes amounting to $1000 each.

Mentioning these different solicitations does not mean that they are right for you. Make sure that you compare the balance of your present loan and the overall interest payments with any possible cost of refinancing such as closing costs, interest payments and appraisal fee for the entire duration of the loan.

Even if there are long-term advantages of paying your debt in full, do not disregard the impact of a higher payment in your cash flow every month. You do not want to be forced in a cash crunch that will push you to sell your home in a struggling housing market.

Moreover, check around as much as you can. In the past year, many customers of major banks complained that their refinancing was slow. By looking at all your possible options, you can save money on lower fees and rates and you can find a lender that can quickly approve your loan.

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Goal of Fed’s Operation Twist

The stocks of banks have been unpredictable since the Federal Reserve’s announcement to push the interest rates lower in the long run. On the positive side, “Operation Twist” is created to stimulate loan growth, a challenging aspect in their operations as a result of the recession. At the same time, most financial institutions have been hesitant to provide loans while they are trying to improve their balance sheets that are affected by the real estate collapse in 2008.

According to the Fed’s statement, the economy is slowly growing, the rate of unemployment is high and the housing market is continuously collapsing. The central bank provided a statement saying that the goal of operation twist is to lower the borrowing cost of consumers and businesses together with the price of mortgage loans. It expects the lower rates to entice companies to construct new factories and hire additional employees. It also anticipates consumers to begin spending their money for purchasing cars, homes, clothes as well as for traveling.

In the past quarters, main banks have started to show credit quality improvements. More careful credit checks have resulted to lesser loan delinquencies and higher financial stability. With this, banks are allocating less money to spend for bad loans and some are observing the decrease in loan losses. While the quality of credit gets better, the increasing unemployment rate has been adversely affecting the long term growth of banks’ loans.

Operation Twist also comes with controversies. Richard Fisher, Federal Reserve Bank of Dallas’ President said that he is against the recent attempts of the Fed to stimulate the growth of the economy fearing that it may not work, intimidate consumers and constrict bank earnings. He added that Operation twist may be counterproductive. Consumers might think that the Fed believes that the economic condition is much worse than they perceive which may encourage them to store money, said Fisher.

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