Home Finance How to Choose the Right Bank for Your Small Business

How to Choose the Right Bank for Your Small Business

16 min read
how to choose a bank for your small business

Does your banker drive you near crazy? Well, 32 percent of businesses feel their bankers make them pull out their hair too.

Starting and scaling a small business is extremely difficult, and inadequate banking services can drag you down. A supportive and reliable bank is a lifeline during the difficult times that a small enterprise has to endure.

Therefore, selecting a lender for your firm shouldn’t be another chore to check off. You must pay special attention. Here are some tips to help you figure out how to choose a bank for your small business.

1. Know What You Need

Is it possible to select the right financial partner if you do not understand your baking needs? Highly unlikely. Thus, the first step in finding the right baking partner for your small business is to assess your firm’s needs correctly.

The most reliable way to understand your needs is to investigate your operations. How your small business runs daily can give you accurate clues on what matters for your firm.

For example, when you are weighing options for your firm’s account needs, the number of transactions you make matters. On top of that, you also have to look at what is the lowest balance you can have in the checking account.

Make an effort to spy out hidden or extra charges that accompany any action you take when using an account. A low-cost account that will charge you a lot for running too high a transaction limit can hinder your operations.

If you want to invest your profits outside the business, then you need a bank with a robust investment function. Similarly, if you are looking for asset finance services for your small business, a bank specializing in such a can deliver maximum value to you.

With each need you identify, define how a bank can best serve you. Once you outline all your needs, you will have a useful description of the kind of bank you’re in the market for.

2. Compare the Services

Now that you have a specific idea of what your small business needs from a banking partner, it’s time to compare potential partners. The goal here is to arrive as close as you can to a match between the needs you identified and the available baking services.

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Search for banks that specialize in the needs your business has. At times you will have to call to request for particular information, and that should not daunt you.

Is your small firm rooted in the local community? Then the banks you should be surveying need to be locally based with a vast automated teller machine (ATM) network.

For retail businesses, a critical component you must factor in is daily cash deposits. That function will still likely require a nearby physical branch for regular deposits.

Furthermore, a small business needs to rely on a bank recognized as a Small Business Administration (SBA) lender. Whenever your firm decides to go for an SBA loan, a pre-existing relationship with such a lender can prove useful.

The SBA’s Preferred Lenders Program is a useful tool to identify potential bankers who support high volume SBA lending.

Whatever aspect of service you feel might be useful to your business needs to be clarified by the bank. Don’t shy away from requesting specific offerings that can be customized for your firm.

3. Size Matters

The size of your bank does have an impact on whether your financial needs are adequately met or not. A rule of thumb when assessing the size of a bank is to compare it to your small firm’s current and upcoming banking needs.

Small businesses of an online nature find they don’t fit into a cleanly designated slot in traditional banking. Therefore, when you need to get favorable rates for such a business, it may be a struggle. Anytime you need to review your rates, you would have to look for a live representative that large corporations don’t offer as well.

Such a small business might find a better partner at a smaller bank that can more easily offer in-person assistance.

Another area in which the size of your banking partner will matter is in lending. For small businesses just starting out a community bank is a more favorable lending partner. That’s because such institutions disburse their loans while looking at your character and knowledge of the local market.

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A national bank, on the other hand, tends to use a less impersonal approach when lending. As a result, your small business will receive no flexibility, and loan applications will be judged based strictly on the numbers.

4. Don’t Ignore the Reputation

Banking is primarily a business that relies on building and nurturing relationships. Due to this salient fact, the kind of reputation a bank has can be an essential signal as to whether they are a proper fit for your small business.

Take time out to speak to your entrepreneur friends and colleagues who deal with or have dealt with the bak in question. In particular, find out what their experience has been like, in regards to each of the services you feel matter to your small firm.

Additionally, you can scour online review sites for more feedback from present or former clients. Pay critical attention to any common thread of complaints you hear from online reviews as these can be a credible indicator of a persistent problem with the banker.

While it doesn’t hurt if your banking partner scoops the best bank award, what you’re really looking for is reliability. Crowdsourcing is an effective way to pinpoint that reliability accurately.

5. Keep Re-Evaluating

The search for the best banking partner never ends once you identify a worthy candidate. As your business develops, you will likely find some of your needs changing.

Thus, there is a need to re-evaluate your banking experience for improvement regularly.

Even if your current bank offers exceptional customer service and support, you need to keep redefining your needs to know who can best satisfy them.

How to Choose a Bank for Your Small Business

In the race to start and build your small business, a reliable and supportive banker can influence your trajectory. As a result, you should pay critical attention to how to choose a bank for your small business. The right banker for your firm is one that closest aligns their services to your needs.

Do you aspire to deliver excellent results for your small business? Read through our business articles for rich insights that can help scale your business.

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