- Lending authority, small business services, and other inquiries to make to a bank
- Weighing the benefits of a local, regional, or national bank
- Using a one-page information sheet to narrow down your options
By Kemp Coady
Choosing a bank for your business involves more than opening a new account at your personal bank or finding a place with a nearby branch office. You need to understand what services you require and how much they cost. Ideally, you will find a banker who will take the time to help you access any necessary services or resolve any problems, allowing you to go back to running your business with peace of mind.
Questions to Ask
What lending authority do you have?
Check to see what loans the bank offers. Ask them how large a loan they can extend to you without checking in with executives.
Relationship managers at community-based banks often have more discretion than those at a big institution, and they may consider small business lending to be their bread and butter. But lately, the distinctions between “large” and “small” banks have blurred with the industry’s consolidation.
Still, you might find that smaller, regionally focused banks may be better because they know local market conditions. They often provide more one-on-one access to a loan officer and put more emphasis on a borrower’s character rather than just applying a credit score model. And they can be more flexible during tough times, such as covering overdrawn accounts without imposing stiff penalties.
What services do you have for small businesses?
Banks may offer various loan types geared toward small businesses, such as working capital or asset purchase loans. They may also have experience in areas such as commercial real estate, equipment leases, business credit cards and savings accounts, or payroll services.
Assess what services you’ll need for your business to succeed. Finding a bank that can offer multiple services can help you streamline your efforts while you start and build your business.
What rates are you charging?
Rates charged by large financial institutions “are systematically lower” than those charged by community ones, according to a study co-written by the National Federation of Independent Business, an advocacy group. Larger banks are more likely to approve small business owners for corporate credit cards, which can be used for financing.
Is your bank comfortable working with the U.S. Small Business Administration (SBA) loan system?
Federally subsidized loans help protect the bank against default, which makes it easier for banks to lend money. SBA loans are available to businesses whose credit histories, cash flows, or collateral would be inadequate for them to obtain traditional bank loans. The SBA typically offers more flexible repayment terms than traditional lenders.
Larger institutions are more likely to make loans backed by the SBA, which lets them accept riskier borrowers.
What extras are available with your account?
While they typically have stiffer lending procedures, larger banks may also offer added benefits such as online services that help save time and money on tax and accounting assistance. These services may include sending invoices, collecting payments, and payroll and loan applications. However, some banks may charge a fee for these services or tie them to requirements such as having your employees use direct deposit channels.
But keep in mind that banking is a competitive business. It rarely takes more than a year for a new product or service to be copied by banks across the country. First and foremost, you should trust and feel comfortable with your bank.
Compile a list of banks which cater to small businesses your area
For example, in the State of Connecticut some banks that cater to small businesses include:
- Bank of America
- Webster Bank
- Ion Bank
- Thomaston Savings Bank
- Connecticut Community Bank National Association
- Fairfield County Bank
- Quinnipiac Bank and Trust
- The First National Bank of Suffield
Considering Your Options
Start by compiling a list of banks in your area that cater to small businesses. Most areas will have a mix of local, regional, and national banks. For example, Connecticut options include Fairfield County Bank (local), Webster Bank (regional), and Bank of America (national).
Call your local banks to see if they have a person you can contact about their small business services. Get their name, telephone number, and e-mail. After you contact them, see how quickly they respond to your inquiries; you should ideally be able to find someone who offers prompt follow-ups to any questions or concerns you have.
Create a one-page information sheet for each bank you contact. This document should summarize all of the services they offer, including:
- Checking account
- Business savings account
- Credit card
- Deposit-only card
- Discounted employee checking accounts
- Online banking
- Lines of credit
- Working capital, term-loans
- Commercial real estate
- Equipment leasing
- SBA loans
- Wire transfers
- Wholesale lockbox
- Merchant services
- Retirement accounts
- Discounts on hotels, car, and other services
- Awards programs
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InnovatorsLINK, Inc. General Manager and Chief Financial Officer
A SENIOR LEVEL EXECUTIVE with over 30 years successful, results-oriented domestic and international experience in the MEDICAL DEVICE BUSINESS. A Business Leader who created significant increases in profits and cash flow and/or raised money to expand enterprises. A Leader, who attracts and motivates the best talent to achieve the desired results. Board member for AMEX, NASDAQ, and London Stock Exchange companies. Significant international experience in Europe, Latin America, and Japan. Experience the last seven years has included Professorships at Goldman Sachs 10KSB program and University of Connecticut Graduate School of Business. Earned BS Bates College, MBA and MPS Cornell University.
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