It’s only second quarter of 2023 and three banks—First Republic Bank, Signature Bank and Silicon Valley Bank—have failed. While First Republic Bank was the last to fail so far this year, it is the second largest bank failure in history with approximately $229 billion in assets before failing, second only to Washington Mutual’s collapse in 2008, holding $307 billion at the time.
Since 2020, 565 banks have failed, averaging out to about 25 failures annually. With three so far in 2023, bank failures are actually lagging behind the yearly norm. That’s a positive sign, but is still concerning given the current anxious economic climate and ongoing concerns regarding a looming recession.
Moody’s Investors Service cut its outlook for the entire U.S. banking sector and placed six U.S. banks on review for potential credit rating downgrades. According to a CNN article published in March, 2023, Moody’s said, “The good news is that America’s banking system is generally healthy. It has enough cash and liquid assets to withstand an economic downturn. The bad news, for banks anyway, is that U.S. regulators may require them to hold more capital after Silicon Valley Bank’s rapid failure.”
Lots of eyes watch over the banking industry, from regulators and politicians to investors and financiers. Your eyes should be on your bank. Their current standard business practices could be killing your credit history, and you might not realize it until it’s too late and the damage is done.
How do we know? Unlike traditional lenders and big banks that make credit decisions based solely on a credit score, Global Financial & Leasing Services looks at the applicant’s whole story. Primarily, our team works with business owners who have less-than-perfect credit to get them the funding they need to acquire essential business equipment. Getting the whole story requires asking questions about why accounts were closed or why there is negative activity reported. Sometimes, the answers are surprising and little or no fault of the applicant.
The following are real-world banking situations our team has heard while discussing finances and credit histories with equipment financing applicants. We’re sharing them to help make you better informed and in a better position to obtain equipment financing when you need it.
Banks Close Accounts Seemingly on a Whim
Our team spoke to an applicant to inquire about a closed bank account. Turns out the well-known, big bank closed the account due to non-sufficient funds (NSF). If you read your account agreement, the small print states the bank can close or suspend your accounts for any reason they see fit. This particular applicant was fortunate to discover the reason; however, banks aren’t forthcoming with their reason most of the time.
With fraudulent activity and crime on the rise, any irregular activity can result in a Suspicious Activity Report (SAR). If banks fail to submit a SAR when there is reason, banks face heavy fines and employees are penalized. Closing accounts is a way big banks protect themselves and their shareholders from SAR-related sanctions. Unfortunately (or fortunately, depending on your position), the suspicious activity reported is not crime or fraud related a vast majority of the time, but rather a customer making an unusual transaction. For example, depositing large checks from retirement accounts to fund a business purchase, etc. Without personal relationships with their customers anymore, banks are closing accounts proactively to protect their interests.
Banks Stick to Automatic Payment Dates
Automatic payments that come directly out of bank accounts make paying bills and loan payments easy. It avoids ever missing a payment due to a bill lost in the mail or simply just forgetting to pay it. The set date the automatic payment comes out of the account can be problematic though if you’re not tracking your available account balance and don’t have enough funds to cover the payment.
Set a calendar alert for each auto draft date. Check your account balance to ensure sufficient funds are available to cover the payment. Banking is automated. It doesn’t wait a day for a check to clear before withdrawing an auto draft.
A benefit to obtaining equipment financing with Global Financial & Leasing Services is that all our clients have to do is call us if their account balances won’t cover the auto draft. We can pause it and avoid a rejection, plus the service fee big banks charge, and worst case, a closed account. Having a personal relationship with your financing company matters in the time of automation and technology.
Banks Put Unnecessarily Long Hold Times on Your Deposits
Imagine depositing a check, anticipating paying bills or payroll with funds from that check, and having the bank put a 7-10 day hold on the funds. In today’s electronic world, there’s no reason for a bank to place a hold for more than two days.
We’ve listened to applicants who’ve deposited funds, say from accounts receivables, pay invoices and payroll using those funds, only to be charged multiple overdraft fees or had payments rejected.
Stay Informed and Protect Your Credit
Things happen, in and out of your control, that can negatively affect your credit history. But, what’s even worse is when your bank’s standard practices are working against you. Remember, it’s your money. You have the power to bank where your business is valued, where you’re more than an account number.
The same applies to when it comes to obtaining equipment financing for essential business equipment. GFLS is an established direct lender with the unique ability to finance almost any business seeking to acquire equipment. We have been providing equipment financing solutions since 2009 and have the ability to help business owners and startups who have been turned down by the banks. If you have any questions, please get in touch.