How to Choose a Bank for Your Small Business
Explore 7 factors to consider when choosing the best bank for your small business. The post How to Choose a Bank for Your Small Business appeared first on The Bottom Line.
How to Choose a Bank for Your Small Business: 7 Factors to Consider
Selecting the best bank for your small business can feel like a daunting task. With perks, fees, services, and other considerations varying among an overwhelming number of options, it may feel like an impossible job to know exactly which one is right for your needs.
Fortunately, there isn’t actually a right or wrong answer. It all depends on you and your business. Let’s explore some main factors to consider as you select a business bank account.
Know Your Small Business Goals
When deciding on a bank, one of the most important factors to consider is your current situation as well as short-term and long-term business goals. The current and future size of your company will change your banking needs, and while switching banks is always a possibility, it makes the most sense to select one that you can stick with.
For example, while your company may be small right now, you may have a goal to hire more employees in the next 3-5 years. More employees and a bigger business mean higher cash flow needs and, potentially, small business loans. Banks that offer a larger variety of account sizes may be preferable based on those goals.
Long story short, your bank will need to scale with you. Consider your business and growth goals before you begin looking seriously at the options to make sure that whatever bank you consider will have what you need.
Support and Experience
Beyond basic account sizes and services offered by a bank, something to consider when selecting which business to bank with is how much support and experience you will need with a banking partner.
Small businesses like yours can be extremely specialized with unique considerations for every industry, so it’s a good idea to partner with a company that can best understand your situation. Larger banks often have industry specialists to offer advice as well as a wider array of services. However, small banks have their perks too, and may be more attuned to the needs of your business. Based on their knowledge of the area a small bank may be able to offer a deeper understanding of your local audience and more effective advice.
Look for banks that can offer the industry knowledge you need. Meeting with a relationship manager and talking with them should help you get a sense of whether a bank can serve you effectively or not.
Another consideration that can be extremely important as you manage your finances is the level of support and attention you are given by your bank. A consistent point of contact dedicated to your account can help you feel more taken care of in your banking needs so make sure that you feel comfortable with the amount of time and energy you are given. You may also require support offered 24/7 if your small business usually operates outside of standard working hours.
Online vs Brick-and-Mortar
Another item to investigate while finding the best business banking provider for you is what you need in terms of online services versus brick-and-mortar account functions.
More and more banking functions can be done, and are more convenient, online. Tech-centric companies as well as any business that performs banking operations online benefit from the apps, dashboards, and easy-to-use websites that online banking can provide. Paying bills, depositing checks, transferring funds, making payments and more online can make small business banking simpler. Plus, online banks are more likely equipped to provide service all hours of the day.
Other functions may be easier to perform at a brick-and-mortar institution, like in the case of a business where cash is the most common form of payment. Other special service needs may warrant a priority on face-to-face relationships as well. Take into account your small business’s service requirements and future plans as you consider online versus traditional banking options.
Cash Flow Flexibility
Account Maximums, Minimums, and Other Requirements
How your business accepts and makes payments should factor into your choice of bank. Account options will likely have a limit on the number of monthly transactions your account can perform and a minimum balance necessary to avoid fees. Account options may also differ in minimum or maximum withdrawal and deposit amounts. Which features you need for your business will largely depend on how your business usually functions. Whether transactions with your customers are usually on a monthly or daily basis and how they pay you will affect what the best business account for your small business looks like.
Another cash-flow factor includes loan options. Larger banks will likely have access to higher amounts of liquid assets, but small businesses may offer options with lower fees and interest rates.
Loan options don’t always need to be make-or-break when selecting a business banking option, however. Small business loans are available from a number of lenders, some of which may be better suited for your business needs than a traditional bank. Small business loan options from alternative lenders like National Funding may be able to provide more specialized loans better tailored to your specific business and industry.
Ease of Implementation
Ease of implementation is another area where one bank may be better for your business than another. The best bank for you will have applications that are able to work with technology that’s already in place. Seamless integration will allow you to focus less on managing your finances and more on running your business.
Ease of implementation also applies to the location of the bank. In the case of brick and mortar institutions, an easy-to-access location will enable lower the friction between you and managing your funds, and an online bank may be the simplest option of all if it otherwise fits with your needs.
Bad Credit Banking
In your search for a business bank, you may find the one that fits your needs perfectly, but your credit score gets in the way. Larger, more established banks are more likely to turn away small businesses with poor credit than a smaller institution. You may also find that bad credit business loans or business lines of credit are a necessity for your business and your plans for its growth. In your search for a bank, be aware of your business credit score. You may need to start banking with a smaller institution to get your credit on track and then move to a larger one if your credit isn’t quite where you want it to be, but other types of banks may not mind a lower credit score and can still fit your needs.
While other considerations are a good way to narrow down larger amounts of candidates, there are a couple factors that can help you compare banks and figure out exactly which is the best business banking option for your small business in the final consideration stage.
Educate yourself on the fee structure of the banks you investigate. Small fees can add up, creating a potentially frustrating banking experience. Banks will likely have some combination of service fees, atm fees, withdrawal and deposit fees, inactive account fees, and more. Reviewing fee policies will ensure that you aren’t blindsided by any unexpected charges.
Sign-up bonuses can be attractive, but offers like this can be deceiving, and may add costs in the long run. Ideal perks to look out for are the ones that provide longer-term benefits and encourage financially smart goals. Let your other research guide the decision rather than the perks. The best rewards will simply be added bonuses for the decision you would have made anyway.
Talking with other business owners can be a good way to get a sense of what bank might be right for you. Ask your trusted business peers about their banking experiences to get another perspective on what banks really know how to serve a small business like yours.
Trusting Your Gut
At the end of the day, you know your business better than anyone. Doing your due diligence and investigating viable options should give you what you need to make sure you have the best options in front of you. From there, select whatever option gives you the most confidence in the future of your business.