Choosing a bank for your small business can be a tough decision. Picking the best bank for your specific needs can save a lot of time and money. In this article, we have put together a list of questions to ask yourself before making this important decision.
Starting a new small business is not easy and has obstacles that need to be identified and controlled before everything is complete. Small business owners need to spend more time doing their bank “homework” but often don’t. Choosing the wrong bank can cost time and money. On the flip side, choosing the right bank can mean saving time and more money in your pocket. It’s important to remember; banks are competing for you. Don’t let bank shopping intimidate you, because when it comes down to it, you are the one handing out the final rose. In this article, we will list six questions you should be asking (either yourself or the bank), the difference between local-small banks, and large corporate banks and the pros and cons of each.
Questions You Should Be Asking
What services do I need and how much do they cost?
This is perhaps the most crucial question and predecessor to everything else. What do you need? Do you need a loan, a credit card, employee checking accounts? Think about all the services you will need your bank to offer to you. Banks are familiar with these types of questions, and often, business deals will be offered in “bundles.” Make sure you aren’t paying extra for a service you don’t need. Banks will push the most expensive bundle, so it’s important to know what you need- no more or no less.
Does your bank offer SBA loans? (Small Business Administration)
SBA loans are federally subsidized loans. The purpose of these loans is to advocate for small businesses while protecting the banks offering them. This could be important because if you’ll need a loan, this could ensure you get the one you need.
What do your bank’s fees look like?
If you’ve ever used a bank before, you are aware of sneaky hidden fees. I think it’s safe to say we’ve all been there at one point. If not, congratulations! But you’re now entering the world of business banking, where banks consider this their bread and butter. Going back to knowing what services you need- make sure you aren’t paying for a bonus service you don’t need and pay attention to all the details. It’s important to know what you are getting, what you are paying for, and the rules for each account. Get out your reading glasses because it’s time to read that fine print!
What kind of support do they offer?
This may seem like a silly question, but if something hits the fan at 3 am on a Saturday night, you’ll be thankful you went with a bank with a great customer support team.
Does your bank have any kind of transaction caps?
Transaction caps are just what they sound like, caps on your transactions. This means they could block the amount of times you withdraw or deposit a month. This may not be high up on your list but, if it is, it’s important to know that this is a real thing in the world of banking.
What is your bank’s reputation?
This is the fun part; you get to be a private investigator! Do a little research and see what your fellow small business owners have had to say about these particular banks. Don’t be alarmed at every angry blog post you read about each bank; look for the important ones. It’s like your favorite restaurant, at least one person has written a bad review about them.
Small Banks vs. Big Banks – Pros and Cons
Small Local Banks
Pros: Friendlier, more one-on-one time with loan officers or bank managers, and often judge good nature and accountability rather than the credit score system. A lot of times, these banks are willing to work with you more when times get tough. You’re a person with a name, not a number, in a database with a credit score.
Cons: Smaller, local banks are going to have longer waiting periods on loans and smaller lending authority. Smaller banks are also going to have fewer bonuses and features. This can come in the form of online features, 24/hour support, or little “gifts” here and there for being a customer. Also, expect higher interest rates.
Big Banks
Pros: Big banks are going to be much quicker to pass out loans so that you can expect money in your pocket sooner. They are also going to have more lending authority with lower interest rates on those loans. You may also expect to find a larger line of credit when you apply for a credit card. You can also expect extra little bonuses and features, as stated before.
Cons: As you might have guessed, you are not going to experience the “hometown-friendly” feeling as much when you enter a big bank branch. Your credit score is your name and zero sweet-talking big banks. This is not to say you won’t be familiar with your particular branch managers, but they are going to have a lot less power than they would at a smaller bank.
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