Banking is critically important for small businesses. All businesses must carefully choose the banking services they take part in, but small business banking can take on special significance as banking fees and services can have such a profound impact on your ability to earn and how much it costs you to do so. That is why it is so important to choose the right bank as early as possible in the growth of your business.
Unfortunately, banks for small businesses are not one-size-fits-all. The bank that works best for one business owner may not be the one that works best for you. You need to find a bank that can meet your needs today – and as your business grows and your needs expand. In other words, you need a bank that offers a wide variety of services so that you don’t outgrow your bank but one that feels small enough to make your small business appear to be important to them.
Considerations When Choosing a Bank for Your Small Business
Small business banking is no laughing matter. Choosing the wrong bank can leave you underserved and drowning in fees. Before you choose your small business bank you need to understand how your business operates – at least to a certain degree. For instance, will the bulk of your transactions involve cash, credit cards, or checks? Which months are your slow months and which are your busy months. Also, what kinds of differences between slow and busy months are you looking at in numbers that might affect transaction caps and other limits and fees the bank may impose?
Another question to consider is this – how important is building a relationship with your bank to you? For some small businesses banking is simply a means by which you can conduct business (store cash, pay vendors and creditors, etc.). For other small businesses, the banking relationship is critical for things like lines of credit, daily cash deposits, and the ability to walk into a local branch and talk to a person rather than calling an impersonal switchboard operator when problems arise.
Some small business owners like the personal touch and approach that using small, local banks offers while others are more interested in the bells and whistles that are sometimes available with online banking – at the cost of the “personal touch” they’re more likely to receive at local branches and banks.
Banking Services You May Need
Depending on the scope of your small businesses you may need one or many of the services listed below from your small bank.
- Business Credit Card
- Business Savings Account
- Checking Account
- Commercial Real Estate
- Equipment Leasing
- Lines of Credit
- Merchant Services
- Online Banking
- Retirement Accounts
- SBA Loans
- Wire Transfers
The key is in finding the bank for small businesses that meets your needs today and that will meet them over time – especially within the next 18 – 24 months. If you’re working with a local or community banker, you should also consider finding one that has specific experience working with businesses in your industry. This makes the banker better able to understand seasonal needs you may have, determine your creditworthiness, and to offer small business banking products and services that will benefit your business and facilitate growth.
Understanding the Costs of Small Business Banking
Before doing business with any bank for small businesses it is important to understand the fees, caps, and costs involved in the banking process – particularly with that business. Specifically, you want to know the following things:
- Monthly transaction limits – this would be limits on the number of transactions you can make during a calendar month.
- Minimum account balance – some banks impose penalties and fees if your account balance falls below a certain amount during the course of a month.
- Transaction fees – some banks charge fees for specific types of transactions, whenever you make them.
These fees and charges can add up quickly – especially for businesses that have busy months when deposits are more frequent than normal. What about fees that occur when sales are not as robust and you fall below minimum account balances? Will your business be able to afford them? These are important questions to find answers to.
Finally, make sure your need for accurate account information is available whenever you need it for business and tax purposes. You need a bank that has a reputation for honesty, integrity, and getting the information right the first time every time. Too much rides on your banking relationship. Take the time and make the effort to choose wisely when selecting your small business banking institution.
While it is important to choose a bank that will meet your existing and future needs, it is not a lifelong commitment. If your small business bank isn’t meeting your needs or you are unhappy with the service you are receiving you can switch banks. In fact, you should evaluate your banking relationship annually to make sure you still feel your bank is the best choice for your small business.