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July 19, 2018Jul 19, 2018

Business Financing Options 2018

Starting or expanding a business can be challenging and often impossible for those without the right financial partner looking out for you and your business. That’s why many business owners opt for traditional business loan financing through reputable, established lenders to secure the funding they need to hire additional employees, purchase new equipment and expand their operations.

No matter the source or method of your intending funding, the following options have been proven to be tried-and-true options for business owners seeking additional funding. It is essential to educate yourself on these options, which is why we’ve provided a brief breakdown of the most reliable, top seven: SBA loans, microloans, private lending, lines of credit, personal business loans, crowdfunding, and grants.

Small Business Association Loans
There are a bevy of government-backed Small Business Association (SBA) loans available to both current and prospective business owners with little, or no capital. According to SBA.gov, “When traditional business loans under reasonable terms are unavailable the SBA can help eligible small businesses obtain loans from participating SBA lenders.” SBA.gov and financial institutions that provide SBA loans will walk you through the process of what is required to qualify for the government secured loan.

Microloans
Microloans are short-term loans with relatively low-interest rates often utilized by self-employed individuals and new start-ups with minimal capital requirements. While many financial institutions and online lending sources offer microloans, the SBA-backed business loan programs also offer these loans ranging from $500-$50,000.

Private Lending
Whether from friends, family, or business acquaintances, securing funding from private sources carries more risk but may offer better terms depending on your history and relationship with these groups or individuals. Private financing is more and more common in these days of venture capitalists and private equity firms, but you’ll want to investigate the loan options carefully should an offer come forward.

Credit Cards and Lines of Credit
For most Americans, credit cards have increasingly become a security blanket for business owners in need of emergency funds or short-term financing for purchases. Depending on your credit score and history, your ability to borrow and secure lines of credit through traditional financial institutions can vary. If your credit history is poor, you may be limited to using secured credit cards, which typically carry higher fees than conventional credit cards. When comparing interest rates of credit cards to a line of credit, the line of credit will usually have a lower interest rate than a credit card which means using caution when you’re purchasing with plastic.

Personal Business Loans
Though an increasingly attractive and popular option for new or first-time business owners seeking financing, personal business loans are difficult to secure without strong personal credit and proven business income. They are a convenient option for businesses who don’t qualify for an SBA-backed loan or need additionally funding that the government secured loan standard cap of $50,000. However, for those seeking a small amount of money to purchase equipment or develop an early-stage strategy or initial hiring process, they’re an attractive option for qualified borrowers.

Crowdfunding
This is perhaps the most difficult and least-reliable form of funding available today. Despite some successful products and services launched via platforms like Indiegogo and Kickstarter, there’s no tried and true recipe for success on crowdfunding platforms. In fact, the average Kickstarter campaign only raises about $7,000 and lasts nine weeks — do these numbers sound like they can support the sustainability of your business ideas? While traditional business models don’t often correlate to the crowdfunding world, if anything, it is a good way for inspired entrepreneurs looking to test their market and see what a public response to a crazy idea might be.

Grants
There is no shortage of privately and publicly-funded small business grants throughout the US. Some people choose locally-oriented groups that provide information on small business grant funding, like Prospera Business Network located in Bozeman, Montana which also includes bridge loan financing. Others may fall into the category of statewide, regional, or national programs. If you’re a member of the U.S. military, you have additional financing options available to you through small business grants oriented at veteran-owned companies. Check with your local small business administration office or community development program to see what options are available in your area.

Whatever your company’s future plan is, it doesn’t hurt to discuss your business loan options with a dedicated, community-oriented lending partner. It’s a good idea to do some prep work before reaching out to your local bank, such as cleaning up your credit report, finalizing your business plans, looking for personal collateral options to guarantee your loan, and most importantly, be prepared to invest your time and resources into your business. To learn more about Bank of Bozeman’s business lending options or to speak with a small business lending professional, contact us to schedule an appointment or stop by the branch today.

June 8, 2018Jun 8, 2018

7 Things to Do Before Applying for a Mortgage

Buying a house is a major endeavor. To ensure the process goes as smoothly as possible, here are a few things you need to do to prepare to apply for a mortgage.

If you’re at the stage of your life where you’re considering buying a home, you’ll need to secure a mortgage to make your payments affordable and reasonable over the next few decades. A mortgage is a considerable loan and perhaps the biggest financial hurdle you’ll ever undertake, and due to the size and complexities of applying for one, you’ll need to prepare your financial situation and take a few key steps leading up to the application itself.

1. Monitor Your Credit Score
Likely the most important determining factor for lenders is a potential borrower’s credit score and history. A lower credit score can impact the amount a lender is willing to give you in addition to the interest rate you’ll pay over the duration of the home loan. Checking your credit score with the three major credit bureaus (TransUnion, Equifax, and Experian) before applying is highly recommended.

2. Check for Errors in Your Credit Reports
In addition to checking your score and taking steps to improve it, you’ll want to check for any errors or discrepancies in these reports and check for signs of failed payments, incorrect transactions, and signs of potential identity theft.

3. Settle Any Debts or Delinquent Accounts
If you’re sitting on a large amount of debt from credit cards, vehicle loans, or student loans, you may have a more difficult time applying for a home mortgage. Before you set aside money for a down payment, consider reallocating those assets toward reducing your debt and delinquent accounts.

4. Reduce Your Debt-to-Income Ratio
One thing lenders look for in a borrower are their monthly gross income and ability to make a mortgage payment reliably and consistently. Loan risk professionals consider debt-to-income ratios a crucial factor in whether your loan is approved or not, so trying to reduce that number to 43% or less should be a priority.

5. Don’t Apply for More Credit for at Least One Year
Applying for increased lines of credit, new credit cards, vehicle, personal, or student loans can have a negative impact on your credit score. To avoid a disappointing result during the mortgage application process, don’t apply for any new forms of credit while you’re saving for a down payment.

6. Save, Save, Save
Once you start thinking about the home-buying process, you’ll want to begin saving your extra income toward the down payment. A larger down payment may help reduce your interest rates and improve your chances for qualification, so working toward a larger lump payment at the beginning will only help.

7. Get Pre-Approved
If you have your financial house in order, you can help streamline the home-buying process by getting pre-approved for a mortgage loan and lock in your interest rate. This shows home sellers that you’re serious, qualified, and ready to close on a home, making you more attractive as a potential buyer.

If you’re planning to buy a home and need help getting started, contact Desiree Smith to learn more about the mortgage application process and discuss your plans to become a homeowner.
January 26, 2018Jan 26, 2018

Scouting Around for the Right Bank Account

Have you heard the adage, “There ain’t no such thing as a free lunch?” The “free lunch” in the saying refers to the nineteenth-century practice in American bars of offering a “free lunch” in order to entice drinking customers. Those customers ended up paying a lot for the “free lunch”. The basic idea of the adage is that you don’t get something for nothing.

There is no free lunch in banking services. If a bank is offering services for “free”, ask them to explain how they profit off your banking relationship. If you get a blank stare or the bank says that they just love to give stuff away, then you may want to find a bank that will be honest with you. A bank that is being transparent with their fees and has minimum balance requirements may actually cost you less money than the bank advertising “FREE”.  

How does a “free” account end up costing you? According to the Consumer Financial Protection Bureau, overdraft fees accounted for approximately 65% of revenues from consumer deposit accounts for banks over $1 billion in assets. Among the same sample of accounts, accountholders that incurred one or moreoverdraft fees paid an average of $225 in fees per year. Couple the overdraft fee with other ATM, maintenance, and account use fees (for wires, etc.) and everyone is paying for these “free” accounts.

Comparing accounts at different banks is difficult, because a checking account can house a bundle of services and the fee disclosures vary and can run up to 40 pages. The account that offers the monthly maintenance fee and a minimum balance could be the one that saves you a bundle. Without a lot of painful analysis and a lot of assumptions, how can you determine which bank account is right for you?

The key to picking the right bank is to determine first who offers the services you need, to fit you, your business and your lifestyle. Then seek to understand what the bank wants from you. If you receive a notice that your bank is increasing their account service fees, talk with them to ascertain if the fee will actually impact you, or maybe there is another account option . If they are willing to talk and work with you, then you probably have a relationship focused bank and the right financial partner.
About the Author: Clinton Gerst is the President of Bank of Bozeman, and Independent Community Bank in Bozeman, Montana.

This article is provided for educational and informational purposes only. All expressions of option reflect the judgment of the author, as of the date of writing and are subject to change.
September 8, 2017Sep 8, 2017

EQUIFAX BREACH

Many of you have learned of the security breach of Equifax, a major U.S. credit reporting agency. It has been reported that personal information from approximately 143MM U.S. consumers was potentially compromised. There are things that you can do to protect your finances, like checking your bank statements for suspicious activity, and frequently utilizing online banking. Bank of Bozeman takes extra measures to protect our clients by subscribing to a 24-hour fraud monitoring system. We get alerts of suspicious activity on our clients debit cards. Rest assured that we are here to help assist you if you feel your identity has been compromised.

Please read these articles from the Federal Trade Commission (FTC) and the Wall Street Journal that will outline known details of the breach and steps you can take to protect your financial security and identity

https://www.wsj.com/articles/5-ways-to-protect-your-finances-after-equifax-data-breach-1504835080

https://www.consumer.ftc.gov/blog/2017/09/equifax-data-breach-what-do?utm_source=govdelivery
September 8, 2017Sep 8, 2017

Fed Raises Rates: Growth Forecasted

As predicted, the Fed raised rates 25 bps to 1.25%.  Bank of Bozeman increased some of our rates for deposits.    The prime rate increased correspondingly to 4.25%, but long-term mortgage rates are at some of their lowest levels all year.   So we have good news for both borrowers and savers - how is that possible?

It is a function of a flattening yield curve.  The “yield curve” is simply the yield of each Treasury bond along the maturity spectrum plotted on a graph.  The yield curve typically slopes upward, since investors need to be compensated with higher yields for assuming the added risk of investing longer term.   The graph below shows Treasury rates from last December compared to now.  You will notice that short term rates are increasing and yet long term rates are dropping and the curve is still sloped upward to the right.   The shape of this curve suggests both the Federal Reserve and the public markets believe we are entering a phase of growth with low inflation – just what the doctor ordered. 

The Fed may have another short term rate increase in store for this year.  If the yield curve gets too flat, the Fed can start to influence long term rates by selling some of its securities.  It owns around $4.5 trillion in bonds (yes, trillion), primarily consisting of Treasuries and Mortgage-Backed Securities.   So by raising short term rates and selling its bond portfolio, perhaps the Fed can keep us headed toward that goldilocks’ yield curve where depositors get paid more interest and yet borrowers have great rates.

Because most of you have lived through a number of economic cycles, you are probably discounting the likelihood of this ideal yield curve from happening.   There always seems to be a major event or two that get us off the right economic path.   Or our government takes actions which undermine the economy.   As of this moment, it is a good time both to save and to borrow- so come by the Bank and let us help you take advantage of the season!
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