As a company owner, CFO or Controller, one of your most important tasks is to select the right business bank. It is easy to think that all banks are the same, but there are important differences in services, fees and culture. So it’s worth taking some of your valuable time to insure that the bank you select is the best fit for your business.
First, analyze the services you need from a bank. Here are some factors to consider:
- Cash-Flow Management - Are lines of credit for smoothing cash flow available at reasonable rates, and what are the penalties involved? Are you in a business with low transaction volumes but high dollar amounts (such as capital equipment sales), or high transaction volumes and low dollar amounts (such as gas stations and discount retail)? The former would require more cash-flow management than the latter.
- Future Expansion - What loan services are you likely to need downstream? For example, might you need a Small Business Administration loan provider? And how active is the prospective bank in lending to businesses of your size, age and industry?
- International Concerns - Do you do business internationally? Will you need assistance with import/export issues and currency exchanges? Do you need a domestic bank with international expertise or a bank with branches (or correspondent institutions) in foreign countries?
- Degree of Automation and Contact - Is your organization comfortable with automation, mobile apps, and online access, or do you need service that is more personal? If you need to, can you contact a real person at your bank — and more importantly, the right person?
- Account Access and Security - Can the bank provide the proper balance of account access and adequate security for your business environment?
- Consolidation of Services - Is it important for you to deal with one bank for all of your potential services (and what are those services)? Some examples are:
- Standard Checking and Savings Accounts
- Investment Vehicles and Sweep Accounts (accounts allowing flexibility between savings and investment accounts)
- Commercial Credit Cards
- Credit Card Merchant Services
- Loans for Asset Financing, Expansion, or other Business Purposes
- Line-of-Credit Capability
- Payroll Services
- Domestic and International Wire Transfer Capability
- Low-Balance Alerts
- Access to Historical Statements
- Potential for Customized Services
After analyzing your business practices and needs, assess the resources and capabilities of each candidate bank.
- Local Options – It is often easier to establish good relations with a local bank, and they may be more flexible in working with you. Plus you might have friends or associates in common with a local banker, or belong to the same club (such as Rotary or Kiwanis) or house of worship!
- Fees – Are the fees reasonable compared to the services?
- Size of Bank and Balance/Loan Limits – Are they large enough to provide all the resources and services you need, or too large to provide good customer service? Consider future and expansion needs as well as current needs.
Larger banks are often better for items like corporate credit cards, international capability, and payroll services. However, larger banks may be more bureaucratic. Can you establish a direct relationship with the decision makers? You probably can at a smaller bank.
- Processing Times - Does the bank’s capabilities on processing times and accessibility of services match the needs of your business?
- Expertise - Does the bank have specific expertise in your field? Do they understand your industry, and are they comfortable with the stage of your company (emerging startup or established business)?
- Remaining Services – Check the remaining attributes from your business listed above, such as access and security, for the best match of services and cost.
Once you have chosen a bank, be sure to meet regularly your bankers and maintain a good business relationship, just as you would with your vendors or customers. You should think of your bank as your business partner — because in many important ways, it is.