Hidden Bank Loan Charges That Would Make a Pick-Pocket Envious

There can be more to a bank business loan than making interest and principal payments. Your firm may get a great rate on its new credit line or term loan but you may cry on the way home when you discover the hidden fees and charges.
Even seasoned borrowers can be caught off guard. Borrowing costs can be boosted by thousands of dollars and the effective rate on the loan increased by many basis points as a result of these hidden charges.
Here are some of the fees and charges that can increase your firm's costs on bank loans:
Commitment fees
Many banks charge commitment fees of ½% - 1% or more to issue a commitment to lend money. The fee is calculated on the available credit amount. Commitment fees significantly increase the effective rate on outstanding loans.
These fees can be negotiated. If your firm has a strong credit profile or if the competition among banks in your area is fierce, ask for a lower commitment fee or ask to have it waived.

Non-use fees
These fees may be charged in lieu of or in addition to commitment fees. Non-use fees usually range from ¼% to ½% of the unused credit facility. Although these fees are less onerous than commitment fees, they also increase the effective borrowing rate.
As with a commitment fee, you may be able to get the non-use fee reduced or waived if your firm has a strong credit profile or if the banking environment is very competitive.
Restructuring fees
When your firm has reason to restructure an existing loan, you can expect your bank to charge a restructuring fee for the privilege. For example, if your company has reason to convert a short-term loan into a long-term one, it will probably be charged for this restructure.
These fees can range from ½% to 2% or more plus any bank legal fees or out-of-pocket expenses. If your firm has been a long-term bank customer in good standing, you may be able to negotiate or eliminate the fee. But don't expect to eliminate the bank's attorney fees and out-of-pocket expenses.
Bank attorney fees
Attorney fees usually come into play when the bank uses an outside law firm. Making matters worse, many outside bank attorneys require a borrower to hire an outside attorney to issue an opinion letter covering the transaction.

Usually, only the strongest borrowers in very competitive banking situations can totally eliminate paying bank attorney fees. However, if your firm is a valued customer, your bank may be willing to have these fees capped or reduced. Often banks have some leverage with their law firms to get a discount.
Appraisal/environmental evaluation fees
These fees are charged on many asset-backed loans. They usually involve bringing in an outside expert to evaluate equipment or real estate. These fees can be significant, depending on the type of appraisal or environment issue.
Like attorney fees, appraisal or environment evaluation fees are almost always for the account of the borrower. Perhaps the best result one can expect is to have these fees capped or have the lender split the amount in some way.
Unanticipated audit expense
Many banks reserve the right to audit borrowers or to send bank personnel in for inspections. An audit may be required to review accounting procedures or to monitor collections, inventory or another aspect of your firm's operation. Also, some banks require outside audits by CPA firms in connection with extending credit. Any of these scenarios can create significant expense and involve a substantial time commitment for your firm.
Before signing, review your loan agreement carefully to identify any audit or bank inspection requirement. If your bank requires an audit or inspection that you did not anticipate, try to get it eliminated or try to negotiate limits. You may be able to get a less-stringent requirement or to negotiate a less-expensive alternative to the audit or inspection required by your bank.
If all else fails, try to get audit or inspection fees capped.
Late charges
Charges for making late payments to your bank are generally in your control. These charges can be onerous and can add significantly to your firm's borrowing cost. It is not unusual to see banks tack 300 basis points onto a customer's borrowing rate for delinquent payments.

While it is worthwhile during the negotiating stage of the loan to ask for a lower late- payment charge, the best solution is to try to avoid these charges. If you can, try to get the late-payment rate knocked down to 75 to 150 basis points above your borrowing rate.

Another Way Around the Credit Crisis - Minnesota Bill Authorizing Banks to "Monetize" Public Works

In August 2007, the nation was stunned by the collapse of a major Minneapolis bridge, killing nine. The bridge had been rated structurally deficient by the U.S. government as far back as 1990, and it was only one of more than 70,000 bridges across the country with that rating. The American Society of Civil Engineers estimated that it would take nearly $190 billion to fix the country's failing bridges over the next two decades. Minnesota and other states have the manpower and the materials to rebuild. What they lack is only the money to do it. Municipal governments have to borrow money by issuing bonds, and the interest they must pay on these bonds is going up.
On March 13, 2008, Erik Sirri, director of the SEC's division of trading and markets, told Congress that the credit crisis has spread to municipal bond auctions. "There is no question that the recent dislocations in the municipal bond markets have created unanticipated hardships for municipal issuers and in some cases dramatically increased their borrowing costs," Sirri said. The inability of cities and states to sell municipal bonds to investors at reasonable interest rates seriously threatens plans to build new roads, schools, airports and other public works projects.1

Although the cost of borrowing is going up for municipal governments, this is not because they are bad credit risks. In fact, they are extremely good credit risks. Creditors know where to find them, and local governments have the power to tax to pay their bills. The problem lies with the bond insurers called "monolines," which have ventured into the very risky mortgage-backed securities market. This has put the insurers' triple-A ratings in jeopardy, along with the ratings of the municipal bonds they insure.
While borrowing costs for municipal governments are skyrocketing, the interest rate the Federal Reserve charges to banks has been going down, even though banks are proving to be much riskier investments than local governments. The Federal Reserve is a private banking corporation that is owned by other banks. It was established in 1913 to prevent bank runs and otherwise keep the banks from getting into trouble for over-leveraging (lending out many times their assets), and that remains its principal function today. The Federal Reserve recently extended $200 billion in financing to 20 top investment banks at wholesale rates, but these low rates are not being passed on to municipal governments or home buyers. The Federal Reserve is evidently working for the banks more than for taxpayers or local governments.Thinking Outside the Box: The Minnesota Transportation Act
Many people are getting tired of waiting for the Federal Reserve and the federal government to act, and one of them is a Minnesota resident named Byron Dale. Dale has drafted a bill called "the Minnesota Transportation Act" (MTA), which is scheduled for hearing before the Minnesota Senate Transportation Committee on March 25, 2008. If adopted, the bill could represent a major innovation in the way state and local projects are funded. It would mandate Minnesota's Transportation Department and State-chartered banks to enter into an agreement providing that the banks would advance funds for legislatively-approved transportation projects in the same way that banks make commercial loans - simply by "monetizing" the projects themselves. Banks routinely monetize the promissory notes of borrowers just by making book entries to a checking account and saying "you have a new deposit with us." (More on this below.)

Under the MTA, the state-chartered banks would create a pass-through account titled an Asset Monetization Account (AMA), monetizing the bid value of projects. This would be done in the same way that banks monetize collateral, except that the deposit would go on the bank's books as an asset rather than a liability, turning the bid value of the project into "money" without debt. This money would be debited electronically out of the AMA and credited to the State's Transportation Account (STA), from which it would then be debited out and credited in to the contractor's bank account in a state bank, according to the terms of the contract. The contractor would spend this money to complete the project. The money would flow into Minnesota's economy, where it would provide for better, safer, more durable roads and bridges. It would be used to purchase goods and services, benefiting business. It would go to pay taxes, helping the State balance its budget. And it would flow back into the state-chartered banks as interest on outstanding loans, reducing the number of loan defaults and improving the profits of the state-chartered banks. In this way, says Dale, the MTA would benefit every segment of society.Too Radical? Maybe Not . . .

Dale says he has been proposing this sort of state funding alternative for years; but only now, with the looming liquidity crisis, have legislators begun to take him seriously. His plan may not be such a radical departure from existing practice as it sounds. Commercial banks are already in the business of creating money. Except for coins, our entire money supply is now created by banks in the form of loans.2 Indeed, banks create all the money they lend. This was confirmed by the Chicago Federal Reserve in a booklet called "Modern Money Mechanics," which states:
"Of course, [banks] do not really pay out loans from the money they receive as deposits. If they did this, no additional money would be created. What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers' transaction accounts. Loans (assets) and deposits (liabilities) both rise [by the same amount]."3
Many other authorities have confirmed this money-creating mechanism of commercial banks.4 State-chartered banks get their authority to create money from the State, and the State has the authority to determine the purpose for which banks create money. State banks are now permitted to create money to monetize a mortgage or other promise to repay. They could as easily be authorized to "monetize" the promise of contractors to deliver labor and materials to the State in the form of road and bridge repair and construction.

The argument against this creative approach is that it would be inflationary, but would it? Inflation results when "demand" (money) increases faster than "supply" (goods and services); and in this case goods and services would be increasing along with the money available to spend, keeping the money supply in balance and prices stable. In fact, it is the lending of money created out of thin air that is inflationary, because banks create the principal but not the interest necessary to pay back their loans. Additional loans must therefore continually be taken out just to service the "money" (or debt) that is already in the money supply; and this newly-created money goes into the pockets of middlemen rather than contributing to the productivity of the community. "Demand" (money) thus goes up without a corresponding increase in "supply," creating price inflation.
The solution to this conundrum is to authorize banks to monetize the production of real goods and services, creating supply and demand at the same time. There is substantial precedent for this approach, stretching as far back as the early American colonies:
* In the early eighteenth century, the colony of Pennsylvania issued money that was both lent and spent by the local government into the economy, producing an unprecedented period of prosperity. This was done not only without producing price inflation but without taxing the people.
* When Abraham Lincoln needed money to fund the American Civil War, rather than paying 25 to 36 percent interest charges, he avoided going into debt by printing Greenback dollars that were "legal tender" in themselves. Again, historians of the period attest that this issue of Greenbacks was not responsible for price inflation.
* A successful infrastructure program funded with interest-free "national credit" was instituted in New Zealand after it elected its first Labor government in the 1930s. Credit issued by its nationalized central bank allowed New Zealand to thrive at a time when the rest of the world was struggling with poverty and lack of productivity.
* The island state of Guernsey, located in the British Channel Islands, has been funding infrastructure with government-issued money for over 200 years, without creating price inflation and without government debt.5 But Is It Constitutional?
These governments could create the money they needed because they were sovereign entities, but what about individual States governed by a federal Constitution? In the United States, the U.S. Constitution controls. But that august document says very little about the creation of money - so little that banks have stepped in and taken over the business by default. Here are the sole Constitutional provisions directly addressing the creation of money:

Panama Banks - Safe, Secure, Stable

Panama was once listed as a "non cooperative tax haven" but the little country has worked hard to shed itself of that outcast image. If you are interested in banking in Panama for offshore purposes or otherwise, you should learn about the policies, processes, risks and features involved with transacting business with a Panama financial institution.
Panama has recently tightened its anti-money laundering laws and has created a banking system that is extremely private and highly competitive, but it is monitored well by the international offshore banking community. If you decide to do business with a Panama bank, you can be assured that our privacy will be strictly guarded and your assets will be in a bank that is reputable and safe.
Before the major reforms of the mid 1990s, Panama was home to over 150 offshore banks, but that number has been trimmed to around 80 banks. The remaining banks must adhere to strict banking and privacy regulations while at the same time ensuring that illegal activities are not allowed to happen.

Banks in Panama have many advantages over banks in other offshore jurisdictions. The only type of monies that are taxable in the Republic of Panama are those that are generated inside Panama (foreign derived income is not taxable). If you choose to incorporate your business in Panama, but you decide to conduct your business elsewhere, you can deposit all of your assets and earnings into your Panama bank account without being responsible for paying local taxes on your money.
Panama banks offer many banking services for the banking client that requires a number of different options for their business. There are three types of accounts that you can get at a Panama bank including; merchant accounts, personal accounts and business accounts.

Non-resident Panama bank customers can have Internet account access set up by the bank's management in order to access any necessary account information and in order to transfer funds to and from your Panama bank. It is also easy to apply for and receive a debit, ATM or credit card from a Panama bank to make access to your money even easier.
The majority of banks in Panama require that their potential customers have an initial minimum deposit which can be as low as $1000 USD. Many banks also require that each account must maintain a minimum balance in order to avoid costly fees.

If you decide that a Panama bank is for you, you are able to choose many options. You can open a personal account or you can takes steps to incorporate an IBC or an offshore company. Be prepared to show your personal information and verify your identity by providing a notarized copy of your passport, reference letters and a drivers license or equivalent photo id.
Only you can decide if opening one of the many available accounts at a Panama bank is for you, but you can rest assured that Panama is no longer the place for shady business dealings. The Panama bank system has been cleaned up and offers savvy customers the opportunity to keep their money in a safe account while watching it grow with little tax burden.

Offshore legal is a law firm based in the Republic of Panama which provides clients with professional offshore banking services including free asset planning and protection consultations.

Your Bank is Not Your Friend

Your bank is not your friend.  Many people have an aversion towards dentists, reasonably so.  But far too many folks think their bank is their friend.  This could not be any further from the truth.

Generally when you open an account at a bank, it is what is referred to as a demand deposit account.  Meaning as you accumulate money in your account, you can come to the bank and at any time demand any or all of your money.  Some of your money could be in the form of so called uncollected funds or something.  The bank is not your friend because your friend would NOT charge you $35 for loaning you $5 for a day or two.  Let me explain further.  When you deposit money at your bank, the bank now has to record those funds accounting wise as a liability, THEY OWE YOU these funds.  So effectively when you make a deposit at your bank you ARE in fact loaning them money!  Now lets take it a step further.  let's say I only have one bank.  I am loyal to no one bank but for this example, if I made 50K USD this year and deposited that money at my bank over the course of a year, for the year I have loaned them 50K.  They paid me the money back as I demanded it, by drafting checks or debit card transactions, and they took that off what they owed me.  Now  12 months later I make a mistake!  I forgot to subtract a debit card purchase for $100!  Now I overdraw my account 3 times,  once for $3.50  once for $15 and once for $30.

My 'friendly (self-serving bank)' gladly pays those 3 charges and then smiles and jacks me for $35 times 3 because they had to loan me money 3 times.  You see where I am going with this I hope.  So now I am down $105 in fees and they immediately subtract this from my ALREADY negative account.  I made an error!  I didn't overdraw my account on purpose.  And yet the bank is happy to jack me for $105.  Did they do this to me?  No!!!  But I know people that they do it to on a regular basis.  In fact I know A business man (I CAN'T say where he banks),  that spends on average over $1000 a month on these 'rip off fees'.  Why should my business loan the bank countless thousands of dollars over months and months and years and years and then in the rare instance I make an error and you actually have the nerve to jack me for $105 because you loaned me money!!!  What about all the money (huge sums compared to what you loaned me) I loaned you over the years?

So the bank is not your friend and while I have accounts at several banks,  I know the bank is not my friend and will jack me with some rip off fee anytime they get the chance, that is HOW they make money!  I expect full disclosure in business and all other transactions and relationships, however many banks do not believe the same.  Their rules are strictly set up in a one sided way....all in their favor.  And the reality is YOU are the one doing them a favour by depositing your money (LOAN FROM YOU TO THEM!!!) into their bank, but yet they carry on like they are doing you a favour by jacking you for fees which are 100% profit for them, because they paid your checks!
Your bank banks at a foreign owned bank shouldn't you?  Maybe, Maybe not, That's another article perhaps.  But there are banks and or credit unions now that allow you to scan checks yourself for deposit from the comfort of your home.  So I think it is possible to go bankless!  But I also think you are better off doing your research about the bank before doing business there and having several banks to play against each other, as bankers hate it when another banker is giving away a bigger or better reward or prize for investing at their bank.

Elijah Marks (Kenotech) is a mortgage banker with Virginia Mortgage Bankers licensed in Virginia and South Carolina. Elijah is a mortgage buyer and seller and a real estate investor who owns and manages a small portfolio of real property in Virgina.

Categories That Fall Under Bank Metrics

Like all Metrics Systems, Bank Metrics are a set way for banks to quantify their performance. Bank Metrics, like Performance Metrics is to be formulated according to the banks goals as well as the standards that they set for themselves. Banks differ in Goals. Some banks may see customer turnover as basis of success as opposed to some banks that view revenue as item by which they measure their success rate. There are several categories that help banks organize their metrics system report. Below are a few categories that can be found in a bank metrics report. Knowledge of the following will help Financing Heads and Company leaders to better understand the reports that are handed to them.
General Ledger Measurements can be found in a Bank Metric Report. A General Ledger Measurements is considered to be a fundamental analysis that businesses can perform when they are on a normal operating cycle. The data gathered here is noted down on balance sheets and information on the Bank's income statement. This type of analysis is necessary as an indicator of the overall performance of a Bank; it also gives an idea of the financial status of the organization. General Ledger Measurements presents the following data: Average Balance, Income generated from Interests, Non Interest Income and Others.

Account Measurements are also found under a Bank Metrics report. This generally includes the following data: Number of Accounts, Customers as well as the number of households that avail of the services of the Bank under scrutiny. It also includes both the Average Balance and the Ending Balance. Account Measurement, unlike General Ledger Measurements can be conducted on any given time frame. This subtype of bank metrics is also able to cross the border of all types of banks from remote branches to regional organizations.

Another Sub category that is found in a Bank Metrics Report is that of Costing Measurements. Costing measurement is an analysis of the costs of the Bank in General; this subtype gives a view of the Banks income and expenses whether they are operating or non-operating.

Risk Calculation and Measurement is also presented in a typical Bank Metrics report. This will help Bank management to know what their expected losses should be on certain areas. It also discusses general and specific market risks. The General Market risks that are presented by a Bank Metrics report will give banks the opportunity to make similar comparisons. This means that they can compare their actual and expected loss rates with other banks that function the same way as they do.
Bank Metrics and Analytics can be performed by firms that specialize in this activity. Delegating this task to firms will take a huge weight off the shoulders of a bank's finance office. Specialized firms will formulate customized bank metrics that is designed for the needs of a specific bank. Firms also lure clients by promising a 'quick view' report. This means that the data they have collected is easily viewed and understood by Bank personnel that are to review the reports.

If you are interested in bank metrics [http://business-development-metrics.com/banking-metrics], check this web-site [http://business-development-metrics.com/banking-metrics] to learn more about bank metrics.

How Banks Create Money Out Of Thin Air

Bankers know how to create money out of thin air. In fact, banks are money factories. Banks exist to make money. You might think that banks are in business to provide services such as banking accounts and loans to their customers. It's true that banks provide essential financial services. However, the reason that the banks provide such services is that banks need money to use as raw material to create more money. Where does this money come from? It comes from customer deposits. In other words, it comes from the money you and I deposit into the bank.
Notice very carefully, banks "create" money. It's not simply that banks "earn" profits when they provide bank services and loans. Banks actually "create" new money that did not exist before.
Here is an example of how banks create money. You deposit $100,000 into a one-year Certificate of Deposit at 5% interest. The bank now can use your money to create loans.
The Federal Reserve sets the reserve rate for the bank from 3-10%. A 3% reserve rate means that the bank must keep 3% of the $100,000 on reserve and can loan the remaining 97%. A 10% reserve rate means that the bank must keep 10% of the $100,000 on reserve and can loan the remaining 90%. For our example, let's assume that the reserve rate is 10%. This allows the bank to loan $90,000 of your $100,000 deposit.
So, the bank makes Loan #1 of $90,000 and keeps $10,000 on reserve. This is the critical point where the bank creates money. According to the bank's balance sheet, the $90,000 loan to the borrower is also a $90,000 asset for the bank. By its own brand of money magic, the bank has created $90,000 out of thin air.

But the process does not stop here. Since the bank now has an asset of $90,000, it can make another loan based on this asset. Since the same Federal Reserve rules apply, the bank must keep 10% of this asset on reserve. This means it can loan only 90% of the $90,000. This means that Loan #2 is $81,000. By creating another loan, the bank has created another asset. The $81,000 loan to the borrower becomes an $81,000 asset for the bank. Once again the bank creates money out of thin air.
And since the bank now has an additional $81,000 asset, it can make another loan. Once again, the bank must keep 10% of this asset on reserve. This means it can loan only 90% of the $81,000 asset. Loan #3 is $72,900.
Federal Reserve rules allow the bank to make five to six loans based on the original $100,000 deposit. Each loan creates an additional asset. We'll stop at three loans, review the process, and add up how much money the bank has created.

You deposit $100,000 into a CD. The bank creates three loans based on the original $100,000 deposit. Loan /Asset #1 = $90,000 Loan/Asset #2 = $81,000. Loan/Asset #3 = $72,900. The total = $243,900 in assets for the bank. This is $243,900 in new money.
When you cash out your CD, you get your $100,000 deposit back, in addition to the $5,000 interest. Meanwhile, the bank has created $243,900 of new money. After it pays you 5% interest, the bank has made a tidy profit of $238,900. ($243,900 - $5,000 = $238,900.) If the numbers are confusing, go over them again until you see how magical this process is. This is how banks create money.
To make this point, I have oversimplified the process. A bank doesn't really make a series of separate loans based on a single deposit. Your deposits become part of a pool of money the bank can use to make loans. But this oversimplified example demonstrates how banks create money out of thin air. A bank manufactures money by using the deposits of customers to make loans. The loans become assets and the assets turn into money.
What difference does it make to see how banks use money to create money? You and I can't do what banks do, by loaning on the same money more than once. The real point of this example is to take some of the mystery out of money.

The process a bank uses to create money demonstrates that money is not a commodity in limited supply, where there is only so much to go around. Money is not equivalent to currency. Money is created in money-making transactions, which means there is no potential limit to money.
So, if you want more money, think the way bankers think. Ask how you can use money to create more money. If you really think the way bankers think, you will use someone else's money to create more money. The crucial idea behind all of this is: The greatest limit to money is the belief that money is limited.

Kalinda Rose Stevenson, Ph.D. Discover the difference between earning money and making money in a real estate investing book, "No Money Limits." Visit http://www.NoMoneyLimits.com for your Free "52 Heart of Money Insights."

How to Be a Banking Customer VIP

Once you hit 18, unless your parents are kind enough to help you out, you're on your own. This new independence can be a blast; however, to continue to fully enjoy this time there are a few things that will help you afford your new freedom. One of the first is to have your bank accounts in place.
How you manage your bank accounts today will determine whether you're able to live the lifestyle you desire tomorrow. That's why it's important to open a bank account and establish a relationship with a bank as soon as possible. Opening a bank account will help you to develop a proven track record which can give you advantages when you need a student loan, a car loan, student credit card or a mortgage.
Why open a bank account?

1. Safety - Money that is held in a FDIC insured bank is safer than holding onto cash. Your accounts are insured by the government up to $100,000 so there is not a risk of losing money.
2. Interest - Everyday you have money sitting in a checking or savings account, the bank is paying you interest. Interest rates vary depending on the bank so when choosing a bank this is an important feature to compare.
3. Organizing your budget - A checking account is the hub of your finances. Money you deposit in there can be directed to pay bill, savings and investments.
4. Easier - With online banking you can set up your accounts to automatically pay your bills each month. Once you set this up once you're done. You just need to make sure you have enough money in your account when your bills go out.
5. Tracking - Paying someone in cash can result in problems. That money can be pocketed instead of applied to your bill and there's no way for you to prove you paid them. Paying by check, credit card or debit card will leave a paper trail that will prove you paid the bill.
6. Direct deposit - Rather than giving you physical checks you employer can just deposit your earnings directly into your bank account. This saves you a trip to the bank and often you're able to access the money immediately.
7. Future services -Building a long-term relationship with a bank will benefit you more over time. As your banking needs grow you can get better terms on student loans, student credit cards, auto loans and other services the longer you have a relationship with a bank.
How to Open a Bank Account.

When you open a bank account you should be looking to build a long partnership with the financial institution. Building a long-term relationship with a bank means you will one day receive preferred treatment. The next time you need a student credit card or other type of loan, you will typically qualify easier and pay lower fees because of the relationship you have built. Think of it this way: the sooner you open your bank account, the sooner you will enjoy preferred treatment.
Find a bank that offers services you need now and may need in the future. Immediately, your needs just may be for a checking account. However in the future you may need a savings account, student loan, student credit card and may want to invest money in the stock market. It's much easier to locate one financial institution that can handle all your future needs.

In order to decide which bank is right for you and your money, you need to consider your expectations and purpose for opening a bank abcount: is it for business, pleasure, savings, wage-depositing, eventual loans, etc.?
Check out a few banks and compare bank fees, service charges, and interest rates. Also make sure their ATM's are convenient. If not you could rack up additional fees for using other bank's ATM machines.
When shopping for a bank account to open, choose one that offers a quality online bill pay service. Online banking simplifies your life and makes all your banking transactions available at the click of a button. This allows you to check balances from the comfort of your own home and electronically pay monthly bills without ever writing a check. It also, it gives others the impression your bills are handled by a professional accountant.
Opening a bank account is the first step in building your financial foundation. The sooner you start developing a relationship with a bank or financial institution the more benefits you will receive now and in the future.

The National Financial Educators Council is the leading provider of financial education resources and financial literacy curriculum. Get your copy of our latest tips, a copy of our financial literacy grant guide and receive free video lessons at http://www.FinancialEducatorsCouncil.org.