Business

3 Vital Considerations in Choosing a Bank for Your Small Business

When building a small business, every decision you make is crucial as it can make or break your enterprise. In this case, choosing the right bank for SME banking is no exception. Treat your bank selection like a first date – if your experience is anything less than what you deserve, look elsewhere!

There are simply too many banking institutions to choose from for you to end up settling for anything but what’s best suited for your business. You need to ensure that you build a relationship with a bank that can be an asset to your business instead of being a complete pain in the long term.

Here are things you should consider before making a commitment to your prospective business banking partner:

1. Needs

What exactly are your banking needs as a small business? Start by looking at the banking services you’ll be relying on every day to run your business.

Basic Checking and Savings Facilities

When determining the ideal checking or savings account for your business, take into account the following:

  • The number of bank transactions you expect to make in a month.
  • Your budget for banking fees, costs, etc.
  • The minimum balance you can keep in your current account.

Most banks will offer low-cost accounts but which come with substantial penalties for falling below the minimum balances or exceeding transaction limits. Before committing, ensure you have a full understanding of all the potential charges associated with your banking transactions.

Loans

If you anticipate that you may need to apply for a business or personal loan in the future, limit your bank options to those who lend to small businesses.

Since you already have a relationship with the bank, this may make the loan application process easier compared to going through another financing institution.

If loans are a significant factor, here are some questions to ask your potential bank:

  • How do small businesses qualify for a loan?
  • What are your loan interest rates?
  • Do you offer flexible loan terms?
  • What are your terms for a line of credit?

Deposits, Withdrawals and Transfers

How does money move in and out of your business?

For instance, if your customers pay by check, you would want a bank that enables you to make deposits using a smartphone app. After all, it’s not all the time you can drive to your bank to make deposits.

Alternatively, if you’re a freelancer or contractor who gets paid through electronic transfer or direct deposit, you need to be able to accept and confirm them easily.

For a brick-and-mortar business with numerous sales on a daily basis, it may make more sense to deal with a local bank. Physical bank locations have services like overnight deposits that may be more useful to your business than any online features.

2. Banking Fees

As a start-up business, banking fees are a big deal as cash is usually tight. Even if you get a “free” business checking account, you can still incur extra charges depending on your usage. The fees you acquire and get charged for vary from bank to bank.

You can incur charges for any of the following reasons:

  • Making too many withdrawals and deposits.
  • Infrequent account activity.
  • Failure to maintain the required minimum balance.

It is the bank’s duty to inform clients about different fees and charges so don’t hesitate to ask about them.

3. Reputation

Since you’ll be entrusting the bank with your business’ hard-earned cash, you should at least take a good look at their reputation.

Talk with other business owners in your network and ask about their bank experiences to serve as your guide in the right direction. Ask how satisfied they are with their bank’s services and if their banks are willing to grant loans and give banking advice.

Build the right relationship with the right bank

What you need is a bank that you can place your 100% trust in, and rely on in times of need. As you explore what banking options you have for your small business, focus your choice on a bank that gives you the best value.

Once you’ve selected a bank for your small business, don’t forget to make an effort to develop a good relationship with a banking representative.

Your bank contact person can help you in the future in identifying ways to support your business in the event of a financial emergency. Also, your trusted bank rep can help you in forecasting what banking services you’ll be needing for your business to keep growing down the line.