One of the most important decisions you can make as a small business owner is selecting the bank that will manage your business accounts. Of course, it’s important to keep your business and personal banking separate, but there are a number of other considerations that are equally important when selecting a financial institution for your small business.
In this post, we’ll touch on the small business banking industry and examine the ways financial institutions can either help you achieve financial growth or slowly and steadily eat away your hard-earned cash.
Choosing the Best Financial Institution
What’s good for the freelance designer might not be good for the family-owned restaurant. Still, there are some universal questions entrepreneurs should ask themselves about small business banking. The following questions will also help you assess whether you should make the switch to a more SMB-friendly bank.
1. Is your bank close by? Online banking is great, but most business owners find they need to make routine trips to the bank to make deposits or meet in person with a bank representative or manager. Convenience is definitely a part of the equation.
2. Is your bank too big? According to Christine Lagorio, financing and small business writer for Inc.com in a recent small business banking article, smaller banks are more likely to lend to small businesses in their communities. She writes, “In fact, though small and midsize banks control only 22 percent of all bank assets, they account for 54 percent of small business lending.”
3. Have your current bank’s policies changed in the last 6 months? Don’t just throw away those important notices you get in the mail about policy changes. They could include new fee notices or announce changes in terms that are less beneficial to your business. It might be time to re-evaluate.
4. How does this bank compare to others in my area? Do yourself a favor and compare the terms on different accounts from each bank in your area. Most banks offer at least a couple of small business banking options. Make a checklist and thoroughly review all the possibilities.
Beware of Bank Fees
Banks provide an important service, safely keeping and protecting your money, giving you the convenience of shopping with credit and debit cards, and providing loans so that you can grow your business.
However, some of them are big money-makers, profiting from you in ways they don’t always broadcast loud and clear. In fact, as many a news story has pointed on in the last couple of years, some of them are just downright dubious. Here are 4 common fees you should ask about before you open an account:
- Research fees are charged by some banks when you need to get documentation of a prior transaction or resolve transaction disputes.
- Low-balance fees are often charged by banks when your account falls below a specified amount. Even if you’re only below the minimum for a day, you could be charged for it.
- Transaction limit fees are charged by some institutions when you exceed a specified number of debit and/or credit transactions in a month. If your account sees a lot of activity, avoid these accounts like the plague.
- Monthly service charges are common on many business accounts, but some of them can be avoided if you are eligible for free business checking and savings accounts. Read the fine print before you sign, however, as fees are often applied when you don’t meet the account’s strict terms.
Have you had an especially good or bad small business banking experience? What tips would you offer the rookie entrepreneur?
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