Small Business Banking Basics

"More bang for your buck" describes traditional financial institutions today. It's soooOOO much more than savings and checking.

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Biz Planning Financial Planning Types of Business Entities

Biz Banking Terms Cash Flow Management Bank Checking

Bank Savings Bank Credit

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Account

(a) Credit established under a particular name, usually by deposit, against which withdrawals may be made. (b) A record of the financial transactions affecting a particular phase of business. The financial transactions are dated and entered in the account as debits or credits. (c) As used in the Electronic Fund Transfer Act, account means a demand deposit, savings deposit, or other asset account established primarily for personal, family or household purposes.

Accounts Payable

Amounts a business owes as a result of a purchase against an open account whereby payment is made some time after the actual transaction date.

Accounts Receivable

Amounts a business is due as a result of a sale to a customer on open account whereby payment is made some time after the actual transaction date.

Assets

Economic resources that are expected to benefit and/or contribute to future activities of the business.

Account Activity

A summary of activity on an account. Includes previous balances, payments, credits, new credit extended, finance charges, late charges, and new balance owing.

Account Analysis

Determination of the profitability of a checking account.

Account History

The payment history of an account over a specified period of time, including the number of times the account was past due or over limit.

Available Balance

The portion of a customer's account balance on which the bank has placed no restrictions, making it available for immediate withdrawals.

Bad Debt Recovery

The collection of funds on an account that has been charged off to a bad debt.

Bad Debt Ratio

The ratio of bad debts(s) to sales outstanding.

Balance Due

That dollar amount representing the sum of the previous balance due plus cash advances and merchandise purchases for the billing period less credit for payments and/or merchandise returned plus any appropriate finance charge.

Balance of Account

That amount necessary to equate the total debits and total credits posted to any given account.

Balance Owing

The amount outstanding.

Balance Sheet

(statement of financial position, statement of financial condition) A snapshot of a businesses financial status at a specific point in time.

Bank Card Center

The physical facility where bankcard operations are conducted.

Bank Debits

The sum of all checks and other instruments charged against the deposited funds of a bank's customers.

Bank Identification

A series of digits used to identify a particular bank.

Bank Statement

A periodic record of a customer's account that is issued at regular intervals, showing all transactions recorded for the period in question.

Bankrupt

The quality of a person, corporation, or other legal entity who, being unable to meet his or her financial obligations, must relinquish his or her property to a receiver or trustee for administration and distribution to creditor.

Cash Management

Cash Management may be defined as the systematic gathering of information about your businesses collections, disbursements, and balances in order to effectively manage available funds at all stages of the cash flow cycle.

Certificate of Deposit

Savings certificate that entitle the holder to the receipt of interest. CDs are issued by commercial banks and savings and loans (or other thrift institutions).

Debit

(a) A charge to a customer's bank card account. (b) A charge against a bank deposit account. (c) An entry on the left side of an account.

Debt

Money obtained in the form of a loan, which will be repaid over a period of time at specific rate of interest.

Economic Activity

The production and distribution of goods and services.

Equity

Money invested in a business by either the owner or others, which will not be repaid unless the ownership rights that it represents are sold.

Ethics

A system of moral principles and their application to particular problems of conduct, specifically in the case of a specific profession and its members.

Extension of Credit

The granting of credit in any form.

Federal Credit Union

A cooperative associated organized under the Federal Credit Union Act for accepting deposits from members and providing loans and other financial services with the proceeds.

Fee

Fixed amount that a trust institution receives as compensation for its services, to be distinguished from allowance, charge, and commission.

Foreign Currency

The money of another country.

Foreign Trade

The exchange of goods between two nations.

Forecasting

The act of estimating future business operations.

Full Payment

The amount of money owed on a single account that, if paid, will reduce the account to a zero balance.

Gain

A profit, or pecuniary benefit as opposed to a loss.

General Property Taxes

Taxes levied on real estate and personal property.

Good Faith

A standard of conduct between parties meaning honesty in fact in the conduct of the transaction. As an element of a defense to violations under several statues, a good faith effort to comply means that the creditor did not know about the violation and took reasonable steps to avoid it.

Government Bonds

Debt securities issued by the United States government. The six types include: Treasury Bills, Treasury Notes, Treasury Certificates, Series E bonds, Series H bonds, and Treasury bonds.

Ground Lease

A contract for the rental of land on a long-term basis.

Guaranty

The undertaking of responsibility by one party for another party's debt or obligation to perform some specific act or duty. Although the original debtor is responsible for the debt, the guarantor becomes liable in the event of a default.

Hedge

Any purchase or sale of a good or security, having as its purpose the elimination of possible profit or loss arising from price fluctuations.

Homestead

The land and buildings thereon occupied by the owner as a home for himself or herself and family, if any, and in most states protected to some extent by statute against the claims of creditors.

Imports

Goods and services that a nation buys from abroad.

Impound

To seize an item and hold it in legal custody. Items impounded can be cash or other assets.

Incentives

Inducements of either financial or non-financial nature, to reward performance above some standard or designated level.

Income Bonds

Bonds on which the payment of interest is not a fixed charge but is contingent on sufficient earnings.

Income, Fixed

A steady level of income, such as that received from retirement payments or from a security that pays a constant amount at specific intervals.

Incorporate

The legal act of forming a corporation.

Infirmity

Any omission in detail whose effect is to invalidate a transfer of title. Infirmities include; lack of endorsement, conflicting written and numerical amounts and signature not present.

Insolvent

The state of being unable to pay one's debt obligations when they come due.

Insufficient Funds

A term indicating that an account balance in inadequate to cover a check that has been written and presented for payment.

Insurance

A contract whereby for a fee (premium) one party agrees to pay a sum to another party in the even that the latter suffers a particular loss. The person or firm that undertakes the risk is the insurer. The party who wishes to be protected from loss is the insured party.

Investor

(a) an individual who purchases securities or other with the intention of obtaining and income from the investment without losing the principal. (b) Real Estate: A holder of a mortgage or a permanent lender for whom the mortgage banker services the loan.

Joint Ownership

The common ownership of real or personal property by two or more persons. The persons involved are either joint tenants or tenants in common.

Joint Tenancy

The holding of property by two or more persons in such a manner that, upon the death of one joint owner, the survivor or survivors take the entire property, to be distinguished from tenancy in common and tenancy by the entirety.

Journal

A book in which original entries concerning transactions are recorded before being transferred to the appropriate ledger accounts.

Judgment

(a) A Sum due for payment or collection as the result of a court order. (b) The decision or sentence of a court of law; to be distinguished from a decree of a court of equity.

Judgment Debt

A debt proven valid by legal test.

Justified Price

The price that an informed and prudent purchaser would be warranted in paying.

Keough Plan

A retirement plan for self employed persons and their employees to which yearly tax deductible contributions up to a specified limit can be made.

Laundered Money

Funds sent through numerous depositories one after another in an attempt to conceal the source of the money.

Legal Charity

One that comes within the legal definition of charity. Lessor: The person, Corporation, or other legal entity that leases property to a lessee.

Liabilities

A businesses economic obligations to non-owners.

Loan

A business contract by which a borrower and lender enter into an agreement.

Loan

A business contract by which a borrower and lender enter into an agreement. Loans are classified according to the lender or borrower involved, whether or not collateral is required, the time to maturity, conditions of repayment, and other variables.

Market Analysis

Research done to measure the extent of and characteristics relevant in a given market.

Money Market CD

A six month savings certificate, pegged to the interest rates on Treasury bills with a minimum deposit of $10,000.00

Money Market Savings Account

This account provides a competitive money market interest rate to customers who are looking for liquidity with the added convenience of check writing privileges for up to three checks per month.

Multi-Currency Loan

A loan involving several currencies.

National Bank

A bank whose charter is approved by the Comptroller of the Currency, it must belong to the Federal Reserve System and FDIC.

Near Term

Short term.

Negotiable

A term used to designate a security, the title to which is transferable by delivery.

Net

That which is left from a certain amount after certain deductions have been made.

Net Change

The difference between the closing price on a security from one day to the next.

Net Worth

Assets minus liabilities for a business. This is the owner's equity. NG: A expression used to designate a check as not good because of insufficient funds.

Obligation

The responsibility to pay a sum of money when due.

Occupancy Expense

Expenses related to the use of property. Occupancy expenses include such items as rent, heat and upkeep.

On-Line Capture

An input system for bankcard dollar entries.

On-the-Spot Loan

An extension of funds on a pre-approved credit line or credit card.

Partition

Division, apportionment, and allocation of property between or among two or more persons who are entitled to fractional interests in the whole property, frequently used in connection with a parcel of real property that must be sold in order to satisfy interests of the parties owning unallocated shares in such property.

Per Diem

A term meaning "by Day", used to compute an allowance or charge that has been established on a daily basis.

Positive Carry

A condition where the yield on a security is greater than the interest cost on funds borrowed to finance its retention.

Preferred Stock

A class of capital stock which has claim prior to that of common stock upon the earnings of a corporation and upon the assists of the corporation and upon the assets of the corporation in the event of liquidation. Preferred stock does not usually entail voting rights as does common stock.

Product Mix

The composite of products offered for sale by the organization. Qualified Endorsement: An endorsement on a check or other instrument containing the words "without recourse" or similar language intended to limit the endorsers liability.

Real Estate

The right, title or interest that a person has in real property, as distinguished from the property itself.

Realtor

A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

Release of Lien

An instrument discharging secured property from a lien.

Remittance Payment

Payment sent by mail to center for processing.

Resolution

A formal document expressing the intention of a board of directors of a corporation.

Retained Income

(retained earnings) The ownership claim arising as a result of profitable operations.

Salary

A fixed income or consideration for services, which is usually paid on a weekly, bi-weekly or monthly basis. This is distinguished from a wage, which is generally paid on an hourly basis.

Sale

The transfer of ownership of some type of property from one person to another, for some consideration.

Salvage

The attempt to get repayment of some portion of a loan obligation, which has already been written off the bank's books.

Second Mortgage

A real estate mortgage subordinate to another mortgage.

Secured Account

An account against which collateral or other security is held.

Short-term Loan

Loan to a business for less than one year, usually for operating needs.

Surety Bond

A bond or guarantee usually given by a bonding company to answer for the debt, default or miscarriage of another. The surety (Company) binds itself to pay if the obligor shall default in his obligation.

Take Profits

To realize a capital gain by selling "a security; to be distinguished from retaining a paper gain.

Tax Lien

A claim against property in the amount that is due and unpaid in real estates taxes or federal income taxes.

Teller

A bank employee who actually handles money and waits on depositors and other bank customers. The teller's main function is to receive deposits and pay out withdrawals. In large banks, there is often a separate teller for each of several windows.

Note: This information is presented to provide a general overview of small business options and related services. It is not intended to be an exhaustive representation. Data has been compiled by the Knowledge Institute for informational purposes only. Content is provided on an "as is" basis and is not intended to, nor does it, provide advice or create a customer relationship between the Knowledge Institute, BUZGate™ and/or any other organization named herein, and any reader.

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page updated: November 24 2008