Banking Business Q3 2021

Banking news and stories to help you maximize the financial success of your business Q3 2021

SOLVE + HERITAGE

A Like-Minded Partnership

IN THIS ISSUE Prioritizing Environmental Sustainability in Your Business Learn the “Five Cs” of Credit Make Sure Your Business Gets Paid a publication of

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Unsplash/Kelly Sikema

SOLVE

Contents

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“...Netspend provides many benefits for our business customers and their employees who don’t have checking accounts. It can save businesses time and money, streamline their payroll process and reduce fraud.”

- Toni Nicholas, VP, Camano Island branch manager Business Profile: SOLVE..................................................................... 2 Prioritizing Environmental Stewardship.......................................... 4 Make Sure Your Business is Getting Paid........................................ 8 The Benefits of Paycards.................................................................. 12

Explore the unique sights and experiences of our Pacific Northwest.

Business Banking Mentor................... 14 Get familiar with what we call the “Five ‘C’s of Credit,” criteria that tell a lender whether you’re a good candidate for financing.

Cybersecurity....................................... 17 Take these steps to protect your business and finances from fraud.

Financial Dictionary............................. 17 Empowering you to make smart business decisions by demystifying banking terminology.

Marketing Manager Shaun Carson

Creative Director Erica Bolvin

Heritage Helps....................................... 6

PNWonderland.................................... 10

Chief Marketing Officer Steve Gahler

Editor-In-Chief Whitney Gibson

IN EVERY ISSUE Our community involvement is part of our company’s DNA and something we’re very proud of. In this section, we highlight the good we're doing in our communities.

Banking Business is a quarterly publication of Heritage Bank

Congratulations to Austin Patjens, VP, SBA business development officer, who was named one of South Sound Business’ 40 Under 40 honoring young professionals in the south Puget Sound, Washington, area.

Heritage Bank is a preferred SBA lender, meaning we can process your loan more quickly than other banks. Learn more and make an appointment to see if an SBA loan is right for you at HeritageBankNW.com.

Managing Editor Stephanie Neurer Contributors Kristen Connor Nigel English Matt Ray John Baker

3615 Pacific Avenue Tacoma, WA 98418 800.455.6126 HeritageBankNW.com © 2021 Heritage Bank, member FDIC, Equal Housing Lender.

The information in this magazine is general education or marketing in nature and is not intended to be accounting, legal, tax, investment or financial advice. Although Heritage Bank believes this information to be accurate as of the date published, it cannot ensure that it will remain accurate.

Statements of individuals are their own—and do not necessarily reflect the position or ideas of Heritage Bank. Contact us at 800.455.6126 or visit HeritageBankNW.com to make an appointment with one of our local experienced relationship managers to discuss your individual business banking needs.

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A MESSAGE FROM OUR CEO

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e’re excited to bring you the second issue of Banking Business, our free quarterly magazine that features news and stories to help businesses maximize their financial success.

Heritage Bank

Last issue we talked about how some of our customers were navigating the pandemic, ways businesses could better manage their cash flow (especially in an emergency) and offered a step-by-step guide on PPP loan forgiveness. This issue, we wanted to dig a little deeper on what you can do to maximize your potential post-pandemic and in the future.

A big focus for Heritage Bank over the last year has been around our commitment to environmental and social sustainability. With guidance from our management-led Green Team, we continuously work to reduce our carbon footprint through the use of green technology, enhanced recycling, repurposed furniture and more. We’ve also built out the “Commitment to Community” pages on our website, which includes an overview of our Environmental, Social and Governance plan.

One of our banking experts on this subject, and leader of the Green Team, is Kristen Connor.

Kristen works with some of the region’s leading nonprofits and businesses whose missions center around sustainability issues. One of her clients is SOLVE, a nonprofit that works to restore and preserve Oregon’s environment.

We spoke to SOLVE’s CEO about what it was like operating during a pandemic while still trying to engage volunteers and keep our environment clean. And what they were able to achieve is astounding. Despite most in-person events being canceled in 2020, SOLVE was still able to organize nearly 2,000 volunteer events.

Kristen also shares why it’s vital for businesses to have sustainable strategies in place, how this can reduce environmental impact and ensure long-term survival. Like signing up for a Strategic Energy Management Program, something Heritage took advantage of in 2020 at our Hillsboro location.

We think you’ll enjoy the contents of this issue that not only include the topics above but many others that will help you better leverage your finances and grow your business. Thank you for reading Banking Business and for trusting us as your banking partner.

Sincerely,

Jeff Deuel President and CEO

We are proud to have been ranked Best Bank in Washington for 2021 by Newsweek magazine. We are committed to provide you the most complete array of banking products and services to help you grow your business.

Jeff Deuel is chief executive officer at Heritage Bank. He has more than 39 years of banking experience. Prior to joining Heritage, he worked at JPMorgan Chase, WaMu, Bank United, First Union, CoreStates and First Pennsylvania Bank. Jeff is a past chair of the Washington Bankers Association. He currently serves on the board of the Oregon Bankers Association and Pacific Coast Banking School.

He is an avid cyclist and has climbed to the top of Mt. Rainier.

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HeritageBankNW.com

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Heritage Bank

Visit HeritageBankNW.com to read more of our business profiles, then make an appointment with a banker who knows your industry.

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Banking Business a publication of Heritage Bank

nment Clean Even Through a e Enviro Pand h t g in emi p e c Ke

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PITCHING IN

ris Carico, CEO of SOLVE, is impressed with the volunteer turnout this past year and the positive impact they’ve had on Oregon’s outdoor spaces. “It’s nice to see. It makes me proud to be from Portland.”

For SOLVE (www.solveoregon.org) it’s about promoting community stewardship that keeps Oregon’s waterways clean. Volunteers join the small statewide nonprofit to help with cleaning up beaches, restoring habitat, picking up litter, clearing illegal dumpsites and more, with the shared goal of keeping Oregon green and healthy.

That’s why Carico decided to partner with Heritage Bank, a like-minded organization that focuses on corporate social responsibility. Plus, Heritage has helped bring other environmentally and socially-focused organizations to SOLVE events, allowing them to scale efforts and meet increased need. “They prioritize the environment. It’s a really strong partnership.”

SOLVE and their team of twelve have organized almost 2,000 volunteer events this year—nearly double previous years. As the city closed down in response to COVID-19, illegal dumping skyrocketed.

State parks were forced to scale back beach cleanup services because of decreased revenue. Outdoor recreation and demand for outdoor spaces were at an all-time high. At the same time, volunteers were seeking ways to get outside and engage safely in their community. “It was this perfect storm of mayhem that really created the energy and momentum for the work that we do,” says Carico.

With guidance and expertise from Heritage, SOLVE has been able to focus on increasing volunteer events and bringing people together as stewards in their community. “It’s been good

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“What a group of 50 can do in two hours is remarkable.” to see people coming back week after week to be a part of something bigger,” explains Carico.

“It’s very tangible. You can walk around, pick up a bag of trash, and then at the end, you see the collaborative effort of everybody. You see the impact immediately.”

Volunteers at SOLVE events are filled with pride in what they’ve accomplished. There’s a renewed sense of the connection to the community and an understanding of how taking care of outdoor spaces is a shared responsibility. Carico continues, “We’re all living here. We’re all contributing. And, it’s important for us to get that.”

Through it all, SOLVE has come out of the health pandemic stronger than they went into it. Carico credits the partnership with Heritage Bank as a big reason it was such a successful year. Heritage was able to act as a financial consultant for SOLVE, freeing up their small staff to prioritize other work.

A lot of proactive guidance and late-night phone calls got them through the PPP loan process and back to organizing events as soon as it was safe to do so. “Having them involved so deeply was critical for us. They’re the experts. We were taken care of in a way that I never would’ve expected a bank to take care of a customer. It’s a love story—it was just meant to be.”

SOLVE’s mission is to bring Oregonians together to improve our environment and build a legacy of stewardship. Want to get involved? Visit solveoregon.org to find a volunteer event near you.

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PRIORITIZING ENVIRONMENTAL STEWARDSHIP IN YOUR BUSINESS

Gone are the days when consumers turn a blind eye to the environmental impacts of the goods and services they purchase.

One poll found that nearly half of U.S. consumers would shift their buying habits to reduce their perceived personal impact on our ecosystem1 while another showed that more than two-thirds of consumers consider sustainability when making a purchase and are willing to pay more for sustainable products.2 Clearly, research has shown that consumers are more likely to do business with a company that has sustainable strategies in place. They’re more likely to shop with you, seek services from you and, most importantly, refer you to friends and family.

These three things increase your company’s resiliency and ensure the probability of long-term survival.

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However, the challenge of defining what “sustainability” means, let alone defining what it means to your business, can be ambiguous at best. Building a sustainability strategy must be more than sticking a few recycling bins around the office, using energy-efficient lightbulbs or switching to recycled printer paper. And while these are all valid efforts to cut environmental impact, these alone don’t constitute being a green business.

That’s why it’s important to have a strategy in place that aligns your business goals with maximizing the reduction of your environmental impact. “Creating a greener business means establishing an awareness of your company’s impact on the environment and fostering a culture that minimizes this impact. A strategic approach to greening puts your business on the path to sustainability and provides the flexibility to thrive in the future.”3 The success of a company’s sustainability initiatives lies in the ability of its employees to contribute to those sometimes vague targets. Looking for ways to bring corporate goals down to individual levels is a concrete way to influence behavior change and buy-in.

There are things your business can do to prioritize environmental stewardship that goes beyond claiming you’re eco-friendly. Start by incorporating sustainability into your everyday operations. Think about if you have any unsustainable business practices that could be exchanged for a green alternative. You can start small like reducing or eliminating single-use plastics. You can conduct a materiality assessment and see where you can make more sustainable choices in your products. Maybe you have a line of fleet cars that can be swapped for electric cars.

Or use renewable energy as your power source for production.

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Banking Business a publication of Heritage Bank

In banking, like in many service providers, one of the areas we can have the most positive impact is through our employees and our clients. Sometimes, starting with the low hanging fruit, moving towards more energy efficient lighting and reducing paper usage is a great way to educate and engage your employee base in your organization’s environmental efforts. There are great ways that you can make specific changes in the office that not only reduce the resources necessary for your business to operate but also encourage employees to get involved.

Consider implementing a Strategic Energy Management (SEM) program that helps improve energy performance through identifying low and no-cost operational and maintenance improvements for your buildings. This includes

“Creating a greener business means establishing an awareness of your company’s impact on the environment and fostering a culture that minimizes this impact. A strategic approach to greening puts your business on the path to sustainability and provides the flexibility to thrive in the future.”3 things like unplugging machines/electronics when not in use, turning off lights when leaving a room and implementing a green team to monitor energy usage and energy waste. Utilize tools and systems that are there to support sustainability missions. Look to your local municipality as many counties in the Pacific Northwest have programs to help companies with their sustainability goals.

ABOUT THE AUTHOR Kristen Connor has more than 16 years of experience in the commercial banking field, with expertise in business development and portfolio management for commercial and nonprofit businesses. These include some of the region’s leading nonprofits and businesses, whose missions focus on a broad range of sustainability and social justice issues.

Actively involved in her community, Kristen serves as a board member for the Oregon Law Foundation, Age+ and The Corporate Sustainability Collaborative (she’s also a founder). Kristen participates on the finance committee for Business for a Better Portland; and is on the steering committee for TASTE PDX; United for Equity is a premier food + beverage event celebrating those engaged in advancing inclusion + equity in the greater PDX region.

REFERENCES 1 https://www.thebalancesmb.com/greening-your-business-2948100 2 https://www.globenewswire.com/news-release/2019/01/10/1686144/0/en/CGS-SurveyReveals-Sustainability-Is-Driving-Demand-and-Customer-Loyalty.html 3 https://www.epa.gov/sites/production/files/documents/smart_steps_greening_guide.pdf

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NEED MORE GUIDANCE? The U.S. Environmental Protection Agency has a number of great resources on sustainability for small businesses.

Their “5 Smart Steps” guide provides a strategy and step-by-step worksheet to help you create a more environmentally responsible business. The full guide can be found on their website at epa.gov. An overview of the steps is below.

Step 1: Get Ready

Commit to the process. Build your environmental knowledge, and get your employees and stakeholders engaged. Look to employees passionate about sustainability to create a green team to help lead efforts.

Step 2: Get Started

Assess your business’s current impact on the environment and decide where you can make changes to be more eco-friendly. Strategize with cross-functional teams on the best approach to kick off imbedding sustainability into your business culture.

Step 3: Set Goals

Set goals that are specific, measurable, attainable and relevant. Include some big audacious goals in collaboration with your leadership team on a vision of where you want your organization to be in five years.

Work backwards prioritizing goals. Tackling easier to reach goals early makes reaching some of those more challenging goals down the road seem more possible.

Step 4: Go Green

Execute on your goals. Communication is key to getting employees and stakeholders engage. Celebrate wins and talk about barriers. Employee morale rises when people see the results of their hard work.

Step 5: Innovation

Measure progress, update goals as needed and identify other opportunities for continuous improvement.

Sustainability is a journey that never ends. Redefining how your organization can be a good environmental steward throughout the journey will keep momentum.

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STRATEGIC ENERGY MANAGEMENT

SAVE ENERGY AND MONEY THROUGH OPERATIONAL IMPROVEMENTS

While any business can implement SEM on their own, many have found value in leveraging SEM experts or SEM-specific programs. These can be through private companies, utility companies and government agencies.

Below are some examples of typical no-cost actions that an SEM program would recommend to conserve energy, reduce operating costs and further sustainability goals:2 • Turn computers, monitors, printers, copiers and other office equipment off when not in use • Switch off the lights when leaving a room • Unplug devices and chargers that are not in use • Set the thermostat to 65-68 degrees in the day during cooler months and 72-75 degrees in warmer months • Minimize the use of space heaters • Perform a night walk of your buildings to listen and look for energy wasters, like appliances that can be turned off and lights left on • Close window shades on hot days to keep summer heat outside and take advantage of natural sunlight on cooler days • Join or start a green team to get creative about new ways to reduce energy waste in your building Enrolling in an SEM program through a utility company or governmental agency may provide the following benefits: • Staff training on technical and organizational strategies for energy management

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• Support for operational, maintenance and behavioral energy-saving opportunities • Energy usage monitoring and reporting tools • Financial incentives SEM is a long-term approach to energy efficiency, but the benefit of effective energy management ensures continuous improvement and lasting savings.

HERITAGE’S SEM PROGRAM In 2020, our Hillsboro location joined the Strategic Energy Management (SEM) Program offered through the Energy Trust of Oregon. We chose to participate to pilot resource management opportunities with the goal of both reducing our operating costs as well as setting sustainability goals. In the last year at our pilot location, we have reduced our electric usage by 3.5% and natural gas usage by 5% through these simple and low-cost efficiency efforts.

As a participant, we are learning how our business uses energy and identifying where energy waste is happening.

Working with energy coaches, we’ve been provided the framework, training and tools we need to increase employee engagement, track our energy usage and savings and monitor our ongoing progress. We’re excited about this opportunity to reduce our carbon footprint and hope to expand these energy management practices to other Heritage locations throughout Washington and Oregon.

Banking Business a publication of Heritage Bank

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Strategic Energy Management (SEM) programs help businesses improve energy performance through identifying low- and no-cost operational and maintenance improvements for your buildings. Running your building systems more efficiently and reducing wasted energy is one of the easiest ways to reduce operating costs. As a result, the savings from energy efficiency can be reinvested in your organization and employees to help you operate more sustainably and respond more effectively in a rapidly changing world.¹

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Heritage Bank works with Elavon to offer one-of-a-kind solutions that make it easy to accept all the payment methods your customers want to use.

Visit HeritageBankNW.com/talech for a limited-time offer.

Pay, Collect, Protect with Merchant Services

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onsumers have come to expect a seamless and quick checkout process at almost anywhere they make purchases. This can mean having a number of payment and receipt options but also the ability to make a contactless payment through a digital wallet or smartwatch.

Point-of-Sale (POS) systems have changed drastically, providing businesses with greater flexibility, control and intelligence than ever before.1 It’s no surprise that we’ve seen fewer traditional cash registers and more cloud-based POS systems, like handheld devices and tablets. Plus, with the onset of a health pandemic, reducing the spread of germs and protecting personal information became more important than ever—something these updated POS and contactless payment systems can both protect against.

This improved technology keeps your business operating safely and is just as secure—if not more—than traditional payment methods. Tokenization technology, as referred to

by Elavon,2 replaces a cardholder’s payment card numbers,

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rendering them useless to hackers. Modern payment devices also help mitigate the risk of potential data breaches and financial losses through enhanced payment data security.

Other benefits of upgraded/contactless POS systems include: • Collect customer contact information • Generate sales reports • Track inventory • Automated sales process • Integration with other company software • Ease of upgrading or new implementation As payments increasingly become a more connected experience, setting your business up for these payment methods ensures you’re offering a more convenient, safe and frictionless experience for your customers.

REFERENCES 1 https://www.businessnewsdaily.com/6499-pos-changes.html 2 https://www.elavon.com

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MAKE SURE YOUR BUSINESS IS GETTING PAID Establish Efficient Systems

As with most things, prevention is better than cleanup.

If you have good processes in place for collecting debt, the less likely it is that you’ll have to chase debtors. Key factors to keep in mind are: • Age of the debt—the longer you leave it, the tougher it will be.

• Avoid large debts—have customers pre-pay in installments/pay deposits.

• Make sure you have each new client sign a credit agreement (and check their credit history; it’s much easier to find out early if they have a record of poor payment).

• Improve your invoicing—customers won’t pay until they’ve been invoiced, so the sooner you invoice, the sooner you can get paid.

• Revise your terms—there’s no need to stick to the tradition of ‘payment by the 20th of the month following invoice date.’ Changing your payment terms to ‘payment within x days’ may help improve cash flow.

• Reconsider statements—repeated end of month statements simply summarize what the customer owes. This extra administrative step costs time and money so eliminate it if it’s not effective.

• Don’t be afraid to cut off credit—adopt a consistent policy of refusing to supply customers who are seriously overdue and who haven’t responded to your follow-up. Insist that the outstanding debt be settled before you supply more goods.

Telltale Signs of a Risky Customer

You might be tempted to offer the same credit terms to everyone, but it’s better to be choosy when you’re deciding who to accept. In particular, be wary of: • Large orders—it’s not usually a good idea to offer this to a new customer. You’ll expend time, money and resources fulfilling it, which will all go to waste

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if you wind up not getting paid. If you do decide to accept the order, ask for a deposit or progress payments, and of course, make sure you’ve checked their credit rating.

• Try not to rely on one customer—it’s safer to have a number of smaller customers than one large one.

Customer diversification is important to small businesses.

• Don’t be a target—shady customers who’ve been blacklisted by other businesses may target you as their next unpaid victim. Again, credit checking is essential.

Do you need to offer credit at all?

Depending on the type of business you run, you may be able to reduce the number of credit accounts you offer or, if possible, avoid extending credit at all.

• Getting payment at the point of sale improves your cash flow and eliminates the possibility of having to ask people for payment.

• Accepting credit cards can be a straightforward way to offer your customers credit.

Collecting Your Money

Despite your best efforts, chances are you’re going to have to collect debt at some point. There are three main ways to do this: • Personal visits—this is the most effective form of debt collection but is really only practical if the debtor is close by. It’s important to be well prepared for a personal visit. Be clear in your own mind what you want to achieve and how.

• Phone calls—this is still a direct and fast method.

You’re making personal contact and maintaining your relationship by discussing what options are available.

• Letter and email reminders—this is the most common because it’s non-confrontational. It’s also the least effective. It works with customers who intend to pay but slipped their mind. It’s less successful with habitually late payers.

Why It’s Important to Have Multiple Payment Options

If you give your customers the options to pay on the spot, using the latest technology, they’re probably going to use it and enjoy the convenience. It means you don’t have to spend time sending invoices and waiting for payment. The money’s in your account and can be reinvested in business growth.

Banking Business a publication of Heritage Bank

Payment in advance

Contracts and debit orders

Customers first pay the purchase price (including shipping costs) into your bank account. You then wait for the payment to clear before sending the goods or supplying your services.

Accepting Payments Securely Online

Some businesses, such as ones operating over auctiontype sites, require payment in advance to provide protection against online fraud.

Payment by installments

These can be useful if you’re working on a lengthy project, such as a building or a software development program.

Payments made at key stages of the project serve two important purposes: • They provide a regular cash flow to pay running costs • They protect you against total loss if your client doesn’t pay Normal practice is to build staged payments into contracts, based on measurable milestones.

Early payment discounts

Early payment discounts can encourage people to pay on time. They’re more useful on higher margin products or services as the discount will have less impact on your profits than thin-margin products.

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Businesses that offer regular services such as a gym or an accounting firm can benefit from offering customers a set annual (or longer) contract. The attraction for the customer is a price that’s typically lower than paying for each visit or service.

Accepting online payments is beneficial in several ways, both for you and your customers. Some of the benefits include: • Less stress—it eliminates the need to worry about getting paid on time and collect on outstanding invoices. Giving customers the option to pay online means they’re more likely to pay promptly.

• Greater convenience for your customers—online payment method options are beneficial to your customers, many of whom prefer to pay immediately.

• Open up new markets—the ability to accept online payments also opens a whole new market of customers. If you sell physical goods, you can sell beyond your local service area.

• Improved cash flow—by offering online payments straight away, the whole payment cycle is complete.

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4 Culture

PNWONDERLAND

Blurring the lines between trash & treasure

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Across the Pacific Northwest, municipalities are incorporating art and the environment in interesting and sustainable ways.

Cities and public entities now strive to incorporate recycled and reclaimed materials to create public art installations that also beautify essential functions, such as stormwater management and low-maintenance native landscaping.

Themes of the artwork reference the local landscape and wildlife or give a nod to the industries that helped shape the local economies, while challenging the viewer to consider how we interact with and affect our environment.

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Banking Business a publication of Heritage Bank

Salvage Repurposed

In 2017, the Factoria Transfer Station in Bellevue, Washington, was rebuilt as a LEED-Gold certified facility, saving 1.3 million gallons of water a year through drought-tolerant landscaping and a rainwater harvesting system. Public art that reinforces the concepts of ecological sustainability and a reimagining of recyclable materials includes Al Price’s kinetic installation, Still Spinning. Composed of 435 polished spoked wheels against a concrete retaining wall and made from almost 80% recycled material, the sculpture changes depending on the light and wind conditions as well as the viewer’s position as they pass by.

Urban Greening

Depave, another Oregon nonprofit, works to transform paved areas (often unused or vacant parking lots) into community green spaces. Living fences of espaliered fruit trees, edible plants, logs reused as pathway edging, seating or climbing structures for children and art installations created from recycled and salvaged urban materials create a sustainable refuge in the city. Depave also strives to reuse or recycle the concrete and asphalt removed from the projects.

Green spaces reduce stormwater runoff, provide cooling shade, foster habitat restoration and connect the community to the natural world.

Washed Ashore

Erica Bolvin

Similarly, Seattle’s North Transfer Station was remodeled in 2016 to include solar panels, green roofs and an education room with interactive exhibits. Near the entrance sits Reclaimed, a massive sculpture by Jean Shin, constructed from more than 10,000 linear feet of rebar salvaged from the site during the renovation. Coated in orange epoxy, the installation references the topography of the site before the original transfer station was built in the 1960s.

the senses, gain attention and promote solutions to the plastic pollution problem.”1 Since the project’s inception in 2010, more than 10,000 volunteers have helped collect over 20 tons of plastic trash from the beaches in weekly events, sorted plastics by color and shape, and participated in constructing sculptures for commissions, traveling exhibitions and educational workshops across the country.

Giving Life to “Rusty Gold”

Art to Save the Sea

At Washed Ashore’s Bandon, Oregon, studio and gallery, a brilliantly colored coral reef stands across from a lifesized Mako shark, both comprised entirely of plastic debris collected from local beaches—visceral illustrations of the reality of marine pollution. A nonprofit organization comprised of artists, conservationists and educators, the mission of Washed Ashore is to “use the language of the visual, performing, literary and media arts to awaken

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In the hands of Dan Klennert, an artist who creates larger-than-life sculptures from found objects, discarded horseshoes cleverly stand in as the scales and textures of enormous fish. The curves of collected driftwood form the musculature of horses. Salvaged metal pieces, sprockets and wire (what Klennert calls “rusty gold”)—taken from everything from cars to farm equipment—is reimagined into the wings of birds, the limbs of human forms and other whimsical sculptures. In the artist bio on his website, Klennert says, “I feel I’m giving new life to the tools and machines that made America what it is today.” His work is on display in cities throughout Washington state as well as in Portland, Oregon.

You can also wander Klennert’s sculpture park, Recycled Spirits of Iron (he calls it Ex-Nihilo, Latin for “something made out of nothing”), at his studio near Elbe, Washington.

REFERENCES 1 https://washedashore.org/educational-initiatives/

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The Benefits of a Paycard According to a recent survey by the FDIC, approximately 7.1 million households don’t use a bank,1 meaning they have to find alternative methods to spending and saving money. While this may be a choice for some, others are unbanked because they may not have enough money to meet the minimum balance requirements or the fees to keep an account open are too high.

Businesses should be mindful of this when it comes to paying their employees—and what payment options are offered. Just like any other aspect of an employee benefits package, financial wellness should be a focus, because being financially inclusive can result in higher employee satisfaction and increased retention.2 One option is offering prepaid payroll cards, which are debit cards that the employer funds with the employee’s pay. Then the employee can use their card to make purchases or withdraw cash.3 Heritage Bank offers this option through Netspend’s Skylight PayOptions Program.

This is a great option for a business who may employ someone who’s unbanked, but paycards can be used by any employee. Plus, there are a number of benefits for the employer.

Benefits for Your Business

• Streamlined payroll process – reduces the number of checks cut every pay period plus can help you achieve 100% direct deposit • Reduced payroll costs – you could potentially save $2.87-$3.15 per paper check by reducing costs associated with processing, printing and mailing checks, replacing lost or stolen checks and more • End-to-end program management – get help with implementation, support and training as well as access to robust reporting for auditing and account usage • Card inventory management – easily issue and ship replacement cards • Employee enrollment – conveniently enroll employees through the online portal or a secure file transfer • Corporate portal access – send payroll through your existing ACH direct deposit process or use Netspend’s online tool

Benefits for Your Employees

• Time and cost – avoid check-cashing fees and a trip to the bank • Card security – funds are FDIC insured • Convenience – the card can be used anywhere Visa® debit or Debit Mastercard® are accepted • Rewards – earn rewards on select everyday purchases at retailers and restaurants nationwide • Accessibility – access funds the same as a traditional debit card • Online management – 24/7 online account access • Mobile app – make person-to-person payments, pay bills, create budgets and more

Ready to get started or want to learn more? Visit HeritageBankNW.com and chat with one of our relationship managers.

REFERENCES 1 https://www.fdic.gov/analysis/household-survey/index.html 2 https://www.netspend.com/business/blog/three-ways-paycards-help-employers-support-financial-inclusion/ 3 https://www.americanpayroll.org/compliance/compliance-overview/hot-topics/paycards

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Banking Business a publication of Heritage Bank

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“I find that Netspend provides many benefits for our business customers and their employees who don’t have checking accounts.

It can save businesses time and money, streamline their payroll process and reduce fraud. When a client calls me about payroll issues, I always introduce them to Netspend. I even suggest they include it as part of their company’s benefits package.”

- Toni Nicholas, VP, Camano Island branch manager

Equal Housing Lender | Member FDIC

HeritageBankNW.com

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BUSINESS BANKING MENTOR

The 5 Cs of Credit: Our Lending Criteria

From specialized businesses needing working capital to startups looking to expand, companies apply for loans for a variety of reasons. When a business comes to us for a loan or line of credit, there are a number of factors that we look at when deciding to approve the application. This framework is generally referred to as the “5 C’s of credit.” It’s common among traditional lenders and is used in determining a potential borrower’s creditworthiness.

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Banking Business a publication of Heritage Bank

Credit We use a number of credit reporting/scoring agencies to pull a comprehensive credit history. This gives us a holistic view of your current debt, payment history, bankruptcies and credit score. We rely on your history and score to determine your creditworthiness and when setting rates and loan terms.

CHARACTER Character is the most comprehensive aspect of the evaluation of creditworthiness.¹ We want to make sure you’re trustworthy, credible and able to repay the loan on time. We’ll look at things like your work experience, educational history, industry knowledge, references, etc.

CASH FLOW Your capacity to repay a loan is a necessary factor when determining whether we’ll lend your business money—this is also referred to as your cash flow. When you first apply, we’ll ask for a number of documents, such as financial statements, tax returns and other business financials. All of these, in combination with your credit history, tell us that you have the ability to make payments on a regular basis.

CONDITIONS All lenders will want to know your intended use of the money. Are you using it to stay in business or expand operations? The reason and use of a loan may pose more or less risk for a lender. We also consider the state of the economy, industry trends and your ability to convert assets to cash or borrow against those assets in an emergency.

Both of these conditions can affect your ability to repay the loan.

COLLATERAL Collateral provides assurance in case you’re unable to pay for the loan. This can include fixed assets like inventory or financial assets like bonds. Generally, the less you provide for collateral, the higher your interest rate will be.

Interested in applying for a loan? Check out our business loan options on our website. We also have a loan checklist to help you get started.

REFERENCES 1 https://corporatefinanceinstitute.com/resources/knowledge/credit/5-cs-of-credit/

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HeritageBankNW.com

15

F R O M PA D D L E S TO P P E

A Kayak Builder Navigates a New Challenge

The company had been building inventory over the fall and winter that was about to ship out to customers— representing a sizeable investment of time and money from the team over the previous six months. They had no idea if their customers would take the product or if they’d be willing or able to pay for it. As a seasonal manufacturer, their business depended on selling that product.

They also employ 24 skilled craftspeople, many with 20 to 25 years of experience—furloughs or layoffs weren’t an option.

At the same time, there was a public health emergency and a looming shortage of personal protective equipment (PPE).

So, Scott and his partner got the idea to make a face shield prototype from parts on the workroom floor. A seat pan liner became headbands. Kneepads transformed into a contact point. Tip pad rivets held the shield in place. Out of that first prototype, the Skagit PPE partnership was formed.

Eddyline, Chinook Enterprises and Skagit Rotary worked together to manufacture and distribute 2,000 face shields to frontline workers in the community using their existing supplier relationships.

While Eddyline focused on pivoting their operations, Heritage Bank helped them navigate the financial challenges they faced. As a small business partner for Eddyline for the past three years, we helped with their recent ownership transition as well as the acquisition and renovation of their current building. Our team reached out to Eddyline when the Paycheck Protection Program (PPP) was still in draft form to let them know about the upcoming opportunity, and we worked around the clock to help them through the application process. Eddyline was approved within a day of submitting the application and funded within hours of getting approved. The PPP loan allowed Eddyline to keep their employees on the payroll and pivot to face shield production.

“That was incredible. It was a lifeline,” says Scott.

Heritage Bank

“I don’t know that you could really plan a pandemic in a way better designed to really just bring a kayak manufacturer to its knees.” Scott Holley, president and coowner of Eddyline Kayaks, is direct about the challenges his company faced early in the pandemic.

The face shield initiative meant a lot to the company and the community.

They’ve heard thanks from kayak customers, who received the face shields at their health care jobs, and employees feel a sense of pride about being able to contribute to their communities during this time of need.

Scott has found himself kayaking a lot more recently as a way to deal with the stress of this time. “Having that release, having that ability to get out on the water, to find that quiet, magical place and let all of the worries and the cares and everything else fall behind you is something that is super important to me.”

Visit HeritageBankNW.com/allofus to learn more about how Heritage helped Eddyline and other businesses in our community navigate this challenging time.

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Issue 2 | 2021 Q3

Banking Business a publication of Heritage Bank

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i For more cybersecurity tips, visit HeritageBankNW.com and click the Resouce Center button at the top right.

AVOID BUSINESS EMAIL COMPROMISE SCAMS Many of us conduct at least a portion of our day-to-day business communication and transactions digitally and often via mobile devices. While conducting business on the go is convenient, it also opens you up to cyberscams, such as business email compromise (BEC). This is a scam that targets anyone who performs legitimate funds transfers. In a typical BEC scheme, the victim receives an email they believe is from a company they normally conduct business with but this specific email requests funds be sent to a new account or otherwise alters the standard payment practices.

To protect yourself from this fraud, watch for these red flags: > Unexplained urgency > Last minute changes in wire instructions, recipient account information or email account addresses > Refusal to communicate via telephone or online video platforms > Requests for advanced payment of services when not previously required > Requests from employees to change direct deposit information There are also specific cues you can look for in the email to help you spot email scams: Look at the email address of the sender. If there are misspellings or extra letters in the website URL, it’s likely a scam.

Poor spelling and grammar and vague information about “your account” or an email format that looks different from the communications you usually receive are also red flags.

Never click on a hyperlink in an email or provide account information unless you’re certain the email is legitimate. You can always contact the business directly using the information you already have on file.

If you discover you’re the victim of a fraudulent incident, immediately contact Heritage Bank at 800.455.6126 to report the fraud and request a recall of funds.

Equal Housing Lender | Member FDIC

FINANCIAL DICTIONARY Term Sheet

A term sheet is a nonbinding agreement between a potential borrower and lender that outlines the proposed terms of a loan. It’s usually issued after a commercial lender has expressed interest in a transaction and is used for a number of reasons. It gives the applicant assurance that the process of securing financing has been formalized. It also summarizes the parameters under which the lender would approve the loan as well as what documents will be required so a full analysis can be performed later on.

While term sheets are often a positive indication that a loan will be granted, borrowers should always learn as much as possible about the loan-closing records of banks they’ve received term sheets from.

HeritageBankNW.com

17

Ranked Best Bank in Washington, 2021

“We trust their guidance. And that has really set us up for success.”

- Lani Grass, East City Dental

Experience that works for your business We provide a deeper level of personalized service that helps

us tailor the right solutions for the way you work. And when we help businesses in our community, it helps us all.

HeritageBankNW.com/allofus

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HeritageBankNW.com | 800.455.6126 |