Selecting a bank to handle your small business’ financial needs is different from choosing one for your personal needs. To get the most from a bank, be prepared to spend some time investigating the services different banks offer, the fees they charge for those services, and the opportunities to establish a relationship with a bank you know and trust.
Here are five tips to help you choose the right bank for your business.
1. Know What You Want From Your Bank
Are you hoping to take out a loan or establish a line of credit? Do you want investment advice? What about other services banks offer, such as automatic bill payment or credit-card processing? Having a precise idea of what you need from a bank will help narrow your choices.
If personalized customer service is high on your list, for example, don’t hesitate to put a bank to the test. Call and ask a question related to your business. How long does it take to get through to a knowledgeable representative? Send an email requesting information or use the contact form on their website. Do you get a response within 24 hours? It’s best to know ahead of time if a bank demonstrates a genuine commitment to prompt responses and customer support.
2. Compare Small and Large Banks
Big, national banks may offer more favorable interest rates and a wider selection of products, but smaller banks often have a more compelling interest in promoting local business growth. These local banks may be more amenable to granting a loan when it’s needed most.
“Smaller, regionally focused banks may be better because they know local market conditions,” notes The Wall Street Journal. “They often provide more one-on-one access to a loan officer and put more emphasis on a borrower’s character rather than just applying a credit-score model. And they can be more flexible during tough times, such as covering overdrawn accounts without imposing stiff penalties.”
3. Investigate Fee Structures
“Nothing is free” is especially pertinent where banking is concerned. Your conversation with any bank representative should include a close look at fees the for everything from using the ATM, writing a check, and getting a monthly account statement. But also take note of other bank services you may need down the road, including wire transfers and credit-card processing.
4. Look into the Bank’s Reputation
Business owners in your professional network can share their experiences with various banks and help guide you in the right direction. Find out how satisfied they are with their bank’s services and its willingness to grant loans and provide valuable banking advice.
Also investigate whether a local bank qualifies as a Small Business Administration lender. If you decide to apply for an SBA loan, having a relationship with an SBA-sponsored bank may prove beneficial in the approval process.
The SBA’s Preferred Lender Program is a useful resource in identifying banking institutions that conduct high volumes of SBA lending. According to the SBA, these lenders employ a “streamlined paperwork process,” which can make loan approval easier for small-business owners.
5. Establish an Ongoing Relationship
After selecting a bank for your small business, make the effort to build a relationship with a banker who “gets” you and your business. Ideally, this individual will identify ways to support your business you hadn’t thought of and can become a useful resource in the event of a fiscal emergency. Your banker can also help you forecast the types of banking services you’ll need a year or more down the road.