The bank that you choose for your small business can be more important than you think to your company’s success. This choice can impact how much you pay every month in banking fees, what are the bank incentives, whether you qualify for a business loan down the line, and how easy or difficult it is to manage your sales transactions. But with nearly 6,000 banks in the US, how do you choose the best option for your company? We are going to cover five key factors that will lead you to choose the best bank for your small business.
Digital versus brick and mortar banks
Small business owners have different banking preferences and needs. For example, if you run a fast-food restaurant, you’ll probably receive thousands of dollars in cash each month that you need to deposit at a bank.
In contrast, if you run an IT business, you might need to pay vendors occasionally or collect payment from vendors, but the majority of your sales transactions will be cashless. These differences will impact which bank you ultimately choose.
A restaurant owner or another type of business owner who processes a lot of cash and maintains a cash register will be better off choosing a large bank with physical branches. You’ll probably be going to the bank frequently to deposit and withdraw cash. An IT business, eCommerce seller, or B2B business, on the other hand, might do just fine with a digital online-only bank.
Digital banks offer plenty of features, such as mobile check deposits and electronic transfers, and they often charge fewer fees than physical banks. But, the catch is that you can’t write checks or deposit cash, so take that into account when choosing a bank.
Banks charge fees for all kinds of things, so you should read the fine print on any accounts before you sign up. For instance, on checking accounts, banks often include only a certain dollar amount of cash deposits and a certain number of transactions each month for free, after which they charge fees.
Similarly, most banks charge a monthly fee service fee if you don’t maintain a certain balance in your account. Other fees include overdraft fees, ATM fees, lost debit card fees, paper statement fees, check fees, foreign transaction fees, wire transfer fees, inactivity fees, and even account closing fees.
Community banks often charge lower fees and fewer fees than large national banks. On the flip side to fees, you should find out if you’ll be earning interest on any accounts. The interest in savings accounts tends to be pretty low. You can earn more interest on money market accounts and certificates of deposit if your bank provides those. Before you commit to a banking relationship, make sure you understand exactly what you’ll be charged when and why.
Business loan offerings
At some point in your business’s journey, you might be in need of capital, and a common route to business capital is with a business loan. The advantage of working with a bank that offers business loans is that many of your banking needs, such as checking accounts, savings accounts, and loans can be in one place. Plus, if you already have a relationship with a bank before applying for a business loan, it can sometimes be easier to qualify for the loan.
Some banks specialize in offering SBA loans or loans backed by the Small Business Administration. These loans are some of the lowest interest, longest-term loans that you can find on the market. They’re reserved for borrowers with good credit scores, and if that describes you, you should definitely consider choosing a bank for your small business that participates in SBA loan programs. Banks also might offer equipment loans, commercial real estate loans, lines of credit, and other types of business financing—something worth exploring if you need funding for your company.
Although you might find this surprising, many banks actually offer value-added non-banking services for small businesses. Examples include credit cards, merchant services accounts, point of sale solutions, integrated payroll, and budgeting tools.
Budgeting tools in particular can be very helpful, especially if you have multiple accounts at the same bank. Using the bank’s budgeting tool, you’ll be able to get an overview of all your accounts, categorize transactions, and save money towards specific business goals. For credit cards, many banks offer cashback or rewards, but the bonuses vary a lot from bank to bank. Some banks offer cashback for all purchases, whereas others focus on business-specific categories like shipping supplies.
You can certainly use other companies for these various services, but many business owners like the convenience of having multiple tools accessible through the same bank.
If you’re considering a bank with physical branches, you should definitely pay a visit to the bank and speak with their business bankers. Tell them about your business. What vibe do you get? Do they seem to understand your industry and your business goals? Did they suggest products and services that seemed like a good fit for your company?
We also suggest seeing how responsive the bank is by email or phone since you won’t always have time to visit the bank in person. Smaller community banks tend to have more personalized customer service than large banks. Small banks know their customers and the local community really well. However, they might also offer fewer products than large banks, so there are trade-offs that you’ll definitely want to consider. And those are our tips for choosing the best bank for your small business.
Keep in mind that the “best” may mean different things for different business needs. For example, you might choose one bank for your checking account, and another to access loans and lines of credit. Whatever helps your business grow the most efficiently will be the best banking institution for you.
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