PerfectBusiness.com - Powerful Business Planning Software , Find Startup Funding.

Table of Contents

Web

Technology

Location

Legal

Personnel Management

Risk Management

Insurance

Business Success Tips

Sample Documents

Checklists

Contributing Authors

	Tom Severance Author of Business Start-Up Guide
ORDER NOW: Business Start-Up Guide
	Stephanie Chandler Author of The Business Startup Checklist & Planning Guide
ORDER NOW: The Business Startup Checklist & Planning Guide
	Joe Kennedy Author of The Small Business Owner's Manual
ORDER NOW: The Small Business Owner's Manual
	Steven D. Strauss Author of The Small Business Bible
ORDER NOW: The Small Business Bible

Choosing a Bank

Choosing a bank is one of your most important business decisions. A business-oriented bank will provide needed services quickly and never be more than a phone call away. The bank should also stay in the background until needed and not get in the way. Within the industry, banks may specialize in retail (consumer-oriented) banking, commercial lending, real estate, and other areas, so first look for a bank that specializes in working with small businesses. You will know this quickly if a bank officer is assigned as your personal representative and asks detailed questions about the business, so that the appropriate bank products may be discussed. Listen carefully because not all banks offer all products to all businesses.

Factors to Consider When Choosing a Bank

Most small business owners just look at the fees structure when considering a bank, but this should not make a difference. Instead, weigh the following factors when deciding which bank will best meet your needs:

Convenience. This is actually a huge factor because time is so valuable. The bank that is within walking distance trumps a similar bank located across town. Beyond location, consider related factors such as branch offices, parking, ATMs, on-line access (more on this), and hours. A bank may overcome the convenience factor by offering courier services, where they pick up deposits or deliver important documents. Couriers usually are banned from carrying cash, so this may limit their usefulness to retail businesses or those needing cash to pay expenses. It is worth repeating that time is valuable. Do you want to spend extra time driving across town to save on fees, or generating extra revenues?

Relationships. This intangible factor can mean a lot. Sometimes, small business owners and bankers feel good about each other, and sometimes they don’t. Banks won’t bend rules just because everyone likes each other, but the relationship can make a difference in marginal situations. Further, it is good to deepen relationships among others at the bank because employee turnover is always a possibility.

Fees. Ask up front about the fees related to the most-needed services, and don’t worry about the rest. Further, don’t become obsessed with fees, because the bank is merely charging for services which it is actually providing. If the profitability of your business is significantly affected by bank fees, this is not a good sign. Business-oriented banks can normally perform an analysis and recommend a particular group of products and services along with an estimate of fees, after receiving copies of three or more recent bank statements. Of course, as average balances at just about any bank increase, the fees and overall deal get better.

Line of Credit (LOC) Needed? Many small businesses need cash from time to time, and most business-oriented banks offer this in the form of a revolving line of credit. It is relatively easy to get this approved when a new relationship is started with a bank, because you are providing them with much of the needed information anyway--and because they want the business. There is some truth to the old saying, “Banks only lend money when you don’t need it,” so why not apply for a revolving line of credit when the banking relationship commences?

On-line Services. Most banks allow small business owners to see account details through the Internet without any special software or connections. Just about any Internet browsing program (such as Microsoft Internet Explorer) should work. The following are some special features to ask about, beyond access to the checking account:

Can you see details of money market and loan accounts?

Can you execute on-line transfers between accounts (for example, pay down the LOC)?

Can you request stop payments or wire-transfers on-line?

Are there levels to the security? (For example, you, the owner, may transfer funds, but bookkeepers may only see and download account ledgers.)

Finally, for on-line banking, make sure the address bar is an “https” and not “http” (https://www.nicebank.com is a secure connection, whereas http://www.nicebank.com is not encrypted and may be seen more easily by hackers).