There is a new law that will have a profound impact on small business known as the “Check 21” banking law. For a full analysis of the pros and cons of this law for small businesses StartupJournal has a very thorough summary.
What jumped out at me is that the law changes the way checks are handled in the banking system (thanks in part to 9/11). Here is a summary from StartupJournal:
“For those unfamiliar with Check 21, the law was designed to facilitate the way banks move checks around the country. Currently some 40 billion paper checks are shuttled between banks each year by airplane and ground transportation before being cleared and returned to check writers in the mail.
“But the grounding of airplanes after the terrorist attacks of Sept. 11, 2001, underscored the need to make the nation’s payment system more flexible. So rather than require banks to transport original checks between institutions in different states, Check 21 will let these lenders transfer and print electronic facsimiles of the checks instead — otherwise known as “substitute checks” or “image-replacement documents.”
“When the law takes effect Oct. 28, it could theoretically cut the time it takes a check to clear from days to hours. “
This looks like the end of check floating, which was always one of the most creative aspects of being an entrepreneur! How many days would it take for the check to the telephone company to clear? How many days would it take for our payroll all to clear? The art of float financing may soon be sunk!
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