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Protecting Your Small Business from Fraud-Related Chargebacks

Small business owner handles an online order.

If you are a small retail business owner with a brick-and-mortar store, you have likely realized that the way people are shopping is changing due to the ripple effect of COVID-19.

As society continues to adapt to the pandemic and a resurgence of stay-at-home orders, online retail purchases have exploded—especially as consumers gear up for the holiday season. In fact, concerns over extended winter lockdown orders in October have already driven a 53% increase in retail e-commerce transactions.

Unfortunately, as more brick-and-mortar retailers are shifting their focus online, fraudsters have more opportunities to scam customers out of their money—which inadvertently increases chargeback pressure and revenue loss on businesses.

If your small business is adapting to changing shopping behaviors and moving to online-focused transactions this year, it is important to know what you can do to prevent purchase disputes and chargebacks initiated by online shopping fraud. To help, Landmark National Bank is here with a few tips on how you can avoid unnecessary loss during these unusual times.

How to Prevent Fraud-Related Chargebacks Online

With so many consumers shopping on the internet this holiday season, cybercriminals have a surplus of vulnerable customers to prey on. Unfortunately, while cardholders are primarily responsible for their own decisions when avoiding fraud, business owners are often the ones taking the financial hit when a cybercriminal makes a fraudulent purchase.

Fortunately, there are three easy things you can do right now to minimize risk and costly chargebacks:

1. Secure Your Site’s Third-Party Software

If your website uses third-party software that is out of date, your internal security systems could be breached—meaning your customer data could be compromised. Whether you use shopping cart software, shipping software, or other programs, make sure all third-party software is up-to-date or patched to the most recent version to keep your site security strong. Not only does this protect your customers’ data from cybercriminals, but it also protects you from chargebacks due to fraud.

2. Create a Clear Merchant Descriptor

While it may sound simple, having a clear merchant descriptor (a line of copy that identifies your business on a cardholder’s account statement) can help eliminate unnecessary purchase disputes. Ambiguous merchant descriptors can lead to confusion if a customer cannot clearly identify the transaction, which means they could dispute the charge with their bank or credit card company and initiate a chargeback.

Make sure to create a clear and concise merchant description that features your business’ name, phone number, or address to avoid confusion during the busy holiday shopping season.

3. Address Customer Service Issues Promptly

It is always a good idea to address customer service issues quickly, but it becomes even more important during the holiday season. If a customer experiences a delay in their return and refund process after shopping online—or has a difficult time contacting you to find out when to expect their refund—they could dispute the charge with their bank out of anger. Worse, if you already processed the refund but failed to address the chargeback promptly, you could be left with double the revenue loss.

Make sure to address all customer complaints, returns, or refunds as quickly as you can, and provide your customers with answers or updates via clear communication channels.

Minimize Chargebacks Caused by Online Shopping Fraud

As a small retail business owner, dealing with chargebacks caused by online shopping fraud can be stressful—especially if this is your first time venturing into the world of e-commerce. Rather than risking revenue loss, it is important to implement the strategies listed above to protect your business from falling victim to fraud-related chargebacks.

In search of a bank that has your business’ back? At Landmark National Bank, we have a variety of business bank accounts and merchant services to meet your needs. Contact our team today to learn how we can help you stay on top of your finances and get to your money faster.

How to Find the Best Bank for Your Small Business Loan

Business banker goes over business plan with small business owner.

From putting in late-night hours to using your own personal funds, getting your small business idea off the ground is no easy feat. But, once your business plan is finalized and it comes time to present your loan request and acquire funding, how can you decide which bank is best for your small business?

While a bank will evaluate you on all aspects of your business plan, it is also important that you evaluate the bank to ensure you can maintain a long-term working relationship. Rather than basing your decision solely on your bank’s current interest rate, you should focus on the future of your business and how a successful partnership will lead to growth and success.

Here at Landmark National Bank, we have compiled a list of the most important questions to ask your commercial banker when evaluating a potential partnership for a business loan.

9 Questions to Ask Your Small Business Loan Lender

When determining the best bank for your small business loan, make sure to ask all the questions you need to. A commercial banker should be receptive to your concerns, and their answers should help you decide if the partnership is right for you and your future goals. Also, do not forget to trust your gut. Your instincts are an important part of the process, as you know what is best for your business.

1. What are your primary responsibilities and goals with this partnership?

Along with general responsibilities surrounding your loan request, your commercial banker should be more than someone you use to complete a transaction. He or she should have goals that align with you and your business.

Simply put, you will want a bank that is more than just a “money chucker.” The right bank should add unique value to your business outside of the transaction and interest rate.

2. What types of commercial industries and businesses does the bank work with?

It is important that your bank has experience lending money to businesses in your industry. Their understanding of your market and insider knowledge will help you navigate unforeseen situations and growth opportunities.

3. What is your local business lending experience?

You may find it important to have local decision-makers that can better understand your business and the community you serve. These local lenders may know your market better than a corporate banker on the other side of the country. Also, when considering loan decision timeframes, you may want a quick, localized loan decision to take advantage of a timely opportunity.

4. What is the bank’s rating for financial safety and soundness?

A bank’s financial safety and soundness are important, as you want to know that your bank will still be there to serve you in the future. A great source to research bank safety and soundness is BauerFinancial, as they provide star ratings based upon financial strength and longevity.

5. How will you gain an understanding of me and my business?

The more your banker knows about you, your business idea, and your business plan, the better they will be able to tailor solutions for you. Having honest conversations about your financial health early in the loan process will ultimately improve your business loan and help you reach your goals.

6. Will I have a primary point of contact?

 Ideally, your commercial banker will not change on a transactional basis. You will want to build a relationship with your banker for them to get to know your business and provide services and suggestions that fit your long-term plan.

7. How does our banking relationship evolve past our initial transaction?

Banking is always evolving. Having a commercial banker sit down with you on an annual basis to go over those changes, and how they can benefit your business, keeps you on the leading edge of cash flow management.

8. What happens if I have difficulty making my payments on the loan?

While you expect to be successful, adversity can strike at any time. It is important to understand what will happen if difficulties arise and whether your bank will work with you through the tough times.

9. How will you promote my business as a customer of the bank?

Banks work with many different businesses, and some banks love to facilitate introductions and promote your business to other clients. Find a bank that will be a cheerleader for your business and help you expand your network.

Apply for Your Small Business Loan with Confidence at Landmark

When you partner with Landmark National Bank for your small business loan, our commercial bankers are here to help you through every step of the process. With local lending expertise and a drive to see you succeed, we are happy to work with you through all your questions or concerns.

Plus, with over a century of experience and a 5-Star rating from BauerFinancial, you can feel confident that you are in good hands. Don’t put off your small business project any longer—find a Landmark National Bank branch near you and reach out to one of our friendly associates.


How to Ask for a Loan from Your Bank

Small business owners goes over business loan documents with commercial banker.

Building your own business takes time, commitment, and perseverance in today’s economy. From developing a comprehensive business strategy to getting your final product or service buttoned up for your customers, it takes research, prep work, and working capital to realize your passion and become your own boss. But, once you have your business plan finalized, just how do you go about presenting your idea to secure the funding you need?

At Landmark National Bank, we know it might seem daunting at first to present a loan request for your business plan, but we are here to help you pitch your idea like a pro. With this guide, we will prepare you for a meeting with one or our friendly, knowledgeable commercial bankers—giving you the confidence you need to walk through our doors and showcase all that your business has to offer.

Present Your Loan Request with Confidence

When it comes to presenting a loan request for your business, there are a few key strategies that will help show off your industry expertise, experience, and passion, including:

Building an Open Relationship

The foundation of requesting a loan for your business starts with building a strong relationship. From having honest conversations to bouncing ideas off one another, a good working relationship between you and your commercial banker relies on open communication and a strong focus on what will make your business the best it can be. At Landmark National Bank, our commercial bankers are passionate about helping you find success, so it’s important to be upfront about your situation and your future goals right from the get-go.

Requesting a Loan

 When you meet with one of our commercial bankers, he or she will want to know a little about you, your background, and your business. Your banker will need to understand some general information about your request, such as:

  • How you plan to use the money
  • The amount of money you are requesting
  • Your desired loan terms
  • How you plan to pay back your loan
  • And collateral to be used

You may have this information ready in writing, or you can verbally communicate these facts to your banker. Remember, it is important to be prepared with this information before your meeting at Landmark National Bank, as it lets your banker know that you are serious and have put the time and effort into your plan.

Evaluating Your Proposal with the 5 C’s

Once your commercial banker has all the information he or she needs about your request, it will be evaluated against the 5 C’s—which include character, capacity, capital, collateral, and conditions.

1. Character

Your commercial banker will take a careful look at your character. A borrower’s character is generally considered the most important factor in the lending process. Are you trustworthy and honest? Do you have integrity? In your meeting, make sure to tell the truth, good or bad. You can make all the money in the world, but if you do not make good on your promises, it will be difficult to establish a trustworthy relationship.

In addition, your banker will want you to understand the risks associated with your business and discover if you have the industry-related experience to mitigate them. Make sure to highlight all your experience in your line of business and how it relates to your future endeavors. For example, a hairdresser wanting to open his or her own hair salon will be more likely to acquire funding than a hairdresser wanting to open a construction company.

2. Capacity

Your financial ability to meet your debt obligations is your capacity. You may hear your commercial banker refer to “primary source of repayment” and “secondary source of repayment.” For example, if you are opening a gym, your primary source of repayment will be the income generated from selling memberships and other operating revenues.

Typically, a business will want to generate about $1.20 in operating cash flow for every $1.00 of debt payments. This is where a cash flow projection will come in handy. Think about a year’s worth of operations and put a number to the revenue and expenses you expect.

3. Capital

Your “skin in the game” is your capital. This can be from you directly or an investing partner. The more capital you can bring upfront, the better chance you have at being successful in securing a loan. Simply put, the capital funnel into your project illustrates your commitment to the business.

Depending on the type of financing you are seeking, a bank is going to want you or investors to provide at least 20% of the total project cost upfront. However, there are Small Business Association (SBA) loan programs that can help reduce the capital investment to 10%, but specific requirements must be met. Be sure to ask your banker if you meet SBA loan program qualifications.

4. Collateral

The asset that secures your loan is the collateral. Collateral is usually what the proceeds of the loan are used for and can be anything from accounts receivable, inventory, cash, equipment, or real estate. Collateral is usually considered as the secondary source of repayment in case the primary source of repayment fails.

In most cases, Landmark National Bank will secure a loan with an asset that has the same useful life as the length of the loan. For example, a 15-year loan will be secured by real estate and not inventory that will turnover multiple times a year.

5. Conditions

The current state of the economy and trends in your industry are the conditions. While these conditions can be out of your control, they will still affect your ability to repay the loan. You will want to define your market area and describe how those outside factors affect your business plan. Be prepared to discuss your competition and how you plan to differentiate your business from those competitors.

 Additional Information You Will Need

In addition to bringing your business plan (which should include most of the information mentioned above) to your loan request meeting, your commercial banker will also request to see the following financial information:

  • Three years of financial statements and tax returns
  • Pro forma income statement and balance sheet
  • Three years of personal tax returns
  • Personal financial statement

These documents will help one of our team members grasp your past, current, and future financial positions. If you have any questions about these additional documents, don’t hesitate to reach out to our friendly team today.

Achieve Your Business Goals with Landmark National Bank

At Landmark National Bank, we want you to feel confident presenting your loan request to one of our commercial bankers. Aside from preparing the proper documentation and information for your meeting, it is important to remember to just be yourself. We enjoy doing business with honest, hard-working people who are passionate about their goals. For more information on what we require for your loan request meeting, feel free to find a Landmark National Bank location near you or give us a call today.