There’s much at stake when it comes to choosing a good bank for your business. More than just a payment processor and cash depository, an excellent bank is a business partner. Your banker should be a key advisor on everything from setting up bookkeeping to deciding whether to open up more locations; a “seal of approval” to potential customers and vendors; and even a gateway, opening doors to your community’s business circle and providing key introductions.
That’s why we’ve put together these five tips you can use to find a bank that best fits your business.
1. Know Your Needs
Start with the basics: Identify what kind of checking and savings accounts you’ll need. Consider the number of transactions you’ll make per month and the lowest amounts you’ll keep in those accounts. If you plan on doing online business, do you want a separate merchant account for that? The types of business accounts banks offer – and how much they charge – vary widely.
Also consider if you’re going to need loans, whether you need local branches (do you have to make cash drop-offs?), and if you have online/mobile banking needs.
2. Consider the Relationship
Whatever size your business is today, you’ll likely need advice and face-to-face interactions from your bankers as you grow.
If your bank is truly a partner, then you’ll want a partner who knows you. So ask some questions: Where are lending decisions being made, and by whom? Will you have an opportunity to meet with the person making the decision, or will decisions be made by a central authority in another city?
Can you speak with your banker when you need to, or will your questions by some call center? It’s easy for a bank to be there for you when business is good, but who will be there if things go cold for a while and you need advice about, say, smart ways to cut costs? Will your banker return your call? Will he or she know how to help you?
3. Consider Your Options
Generally, you have four options: big banks, local banks, Internet banks, and credit unions. Each has its advantages and disadvantages.
National banks have lots of locations solid online services. However, they’re often disconnected from the communities they serve, won’t always make time for small or even mid-sized customers, and can be tight with their lending practices, especially during economic downturns.
Credit unions, on the other hand, are deeply connected to their communities and, because they are nonprofit, usually offer lower fees. However, they cannot always lend to small businesses and sometimes lack robust online features and mobile services.
Community banks account for 50 percent of all small-business lending, even though they control just 18% of all U.S. bank assests. That's becuase they gnerally offer the best and most face-to-face interaction, and they generally work hard to cultivate relationships with local businesses. Ineed, they can sometimes be your connection to local customers and vendors.
4. Talk to Everyone
Talk to your business peers and personal bank to get an idea of which business banks offer the best services and have the best reputations. If you can, get referrals to the banks at the top of your list. Referred customers are usually worth more and are more dependable. So they may be more likely to offer you better service and lower loan rates.
When you make on-site visits, look at the banker, not the bank. This is who you'll be working with. Again, you want a business partner, not a salesperson. Go in with a list of questions – and be ready to answer the banker’s questions. Consider this a two-way interview. Your relationship with your bank is a longtime collaboration, not a one-time transaction.
A great banker will introduce you to prospective clients and vendors; help you set up your accounts payable and receivable operations; and perhaps one day aid in your search for a controller or CFO. Can you see the person sitting across from you doing all that?
5. Reevaluate Regularly
Once you've chosen a bank, start building a relationship immediately. A solid collaboration leads to more likely loans at more favorable terms. It also leads to those critical ties to the local business community.
But don’t get too comfortable with your bank. As your business grows, a different bank may serve you better, so make a point to review at least annually whether your current bank continues to serve all of your needs.
When you do that review, ask yourself: When was the last conversation with my bank? What was it about, and who initiated it? When I call my bank with a question, do they call me back? How quickly? Do I actually like my banker?
According to a 2013 poll by Gallup, 32% of businesses were "actively antagonistic" toward their bank. You don’t want to find yourself there.
A great bank is a rare and precious resource. So take time and effort to make this important choice. And to set up a conversation with one of our Commercial Relationship Managers, just reach out.