When you’re running a small business, every financial decision can have an impact on your success. Choosing where to do your banking is no exception.
Finding the best bank for your business should involve more planning than just going to the same financial institution you use for your personal banking. The right bank for you to do business with will depend on your business’s unique financial needs and goals – both short term and long term. You’ll also want to consider what your immediate banking needs will be and whether the bank offers what you’re looking for, such as:
• Business Checking Accounts
• Business Money Market Accounts
• Business Loans
• SBA Loans
• Business Lines of Credit
• Business Credit Cards
• Online Banking and Cash Management Services
If you are looking to establish a small business and need a start up loan
, you might consider obtaining one through the Small Business Administration
. An SBA loan often has more flexible repayment terms and less stringent credit requirements than a traditional business loan. If you are interested in an SBA loan
, you must be sure the bank you are considering for your business is an SBA lending partner
Examine Services and Costs
Aside from your immediate needs, you’ll want to think about the future of your business as well. You may just need an account for payments and expenses right now, but if your business grows and expands, you may need financing down the road. When evaluating financial institutions for your small business, you should discuss how they handle small business loans even if that is not currently part of your plan.
Some banks may offer preferential rates or perks to existing customers, or may be willing to relax requirements if you’ve demonstrated good financial stewardship with them. Establishing a relationship now can help in the future if the need for capital arises. It also allows the bank to be familiar with you and your business operations which could result in a quicker approval process should you need quick financing in the future.
Depending on your cash flow and how much money you’ll be moving in and out of your accounts, you’ll want to compare rates. Business deposit accounts often have fees associated
such as service fees, account fees, management fees, and other charges. Some banks may charge extra for transactions over a certain monthly limit. Many business checking accounts and money market accounts also have minimum deposit requirements you must meet to avoid additional costs.
You may qualify for lower initial fees or cash back through introductory offers. Keep in mind, however, that these incentives are not set for the life of the loan or account, so beware of teaser rates or terms. Carefully examine all of the fine print before opening account or taking out a loan, and ensure you understand if and when the terms will change.
Discuss Resources Available to You
Give some thought to the different services that may be beneficial to you. In addition to your general lending and banking needs, consider what business resources and support the bank offers. Do you need online access to your accounts, 24/7 phone support, or the ability to schedule an in-person or virtual consultation
with your banker?
Some banks have small business specialists
and business development officers
, dedicated to helping small businesses grow and flourish. Forming a relationship with this type of banker can be a valuable resource in helping you make important financial decisions for your business. While you can always work with outside experts, it helps to be able to talk things through with a trusted banking partner who is already familiar with you and your business.
Benefits of Using a Local Bank for Your Business
You may think it’s the big, national banks that provide the most small business loans. However, it may surprise you that community banks provide over 60% of loans
to small businesses in the United States. Local banks
are more likely to invest in the communities they are a part of in order to stimulate the local economy. Most local and community banks understand the value of small businesses, and have a vested interest in helping them to succeed
Local banks and community banks often have greater flexibility when it comes to fees, eligibility requirements and payback options compared to larger banks. Since they know local market conditions, they are more attuned to what’s happening in your community. Large banks often have rigid systems and company-wide guidelines
to adhere to and may not have much flexibility with approving a loan. Local banks often take the time to get to know you and get the full picture of your business, rather than simply relying on your business credit score.
Another factor to consider is that staff turnover
tends to be higher at large national banks than at smaller, local banks. So, if you’re interested in forming a long-term business relationship with a bank manager or business loan officer, you’re more likely to have success at your local bank. Community banks also have a reputation for giving more personalized attention
to their customers than the “big banks”.
Choosing a bank for your small business doesn’t have to be a difficult and stressful process. You should, however, take the time to do research and shop around for the financial institution that best fulfills all of your business’s needs. Ultimately, you want to partner with a bank that you feel comfortable with. Keep in mind the potential of developing a long-term relationship in order to grow your business together.
If you are a local business owner or looking to start a business, learn more about BankFive’s business account options
or schedule a consultation
(either in-person, over the phone, or virtually) with our Business Banking Team