Three critical factors to consider when choosing a bank for your business
Test a financial institution’s customer service so you understand what services you have access to and how much they cost
Choosing a bank for your business involves more than opening a new account at your personal bank or picking the branch office nearest your company. You need to understand what services you require and how much they cost.
Ideally, you’ll find a banker who will take the time to walk you through how to solve a problem, so you can go back to running your business. Still, some business owners may spend more time shopping for a laser printer than they would shopping for a bank.
Here are the three most important factors to keep in mind when you look for a bank:
Know what you want
Are you hoping to take out a loan or establish a line of credit? Do you want investment advice? What about other services banks offer, such as automatic bill payment or credit-card processing? Having a precise idea of what you need from a bank will help narrow your choices.
If personalised customer service is high on your list, for example, don’t hesitate to put a bank to the test. Call and ask a question related to your business. How long does it take to get through to a knowledgeable representative? Try sending e-mail requesting information, or use the contact form on their website. Do you get a response within 24 hours? It’s best to know ahead of time if a bank demonstrates a genuine commitment to prompt responses and customer support.
As your small business grows, so does your need for products and services that support your success. Along with more basic services such as cheque accounts, credit cards and online banking, you may have a need for merchant services, payroll support, equipment leasing and more.
Starting, building and growing your business is a labour of love, so choose a bank that understands your business and industry. Turn to your peers who already have a banking relationship — a referral is a great indicator of satisfaction.
Throughout your relationship, your banker will act as your trusted partner, confidant, adviser and experienced consultant, so it’s important that you are comfortable with and confident in their ability to support you and your small business.
In this regard, I feel our big banks are woefully inadequate. The big banks have become the victim of their own success. Due to the high volume of customers, most interactions are handled with inefficiency and very little personal consideration.
High corporate turnover rates mean that business owners may not interact with the same banker for very long. Overall, the experience of working with a big retail bank is likely to be very impersonal.
If you have big expansion plans for your business, you’ll want to find out up-front whether your bank of choice is going to support that, through their loans and line of credit products. If this is important to you, here are some key questions to ask your potential bank:
- What are your loan interest rates?
- How do you vet small businesses to qualify for loans?
- If I need to change my loan agreement, how flexible are you?
- What are your line-of-credit terms like?
If you know your personal credit score, you can discuss with a potential bank whether it would be willing to lend to you. If their credit standards are too high and lending is a deal-breaker for your business, don’t waste your time filling out forms to become a customer.
As you get everything in order to start your entrepreneurial journey, one of your first major decisions will be to choose the financial institution with which your company will do business. Understanding how to choose a bank for your small business involves weighing the costs and services against the specific needs of your company.
Hopefully, this article has been a helpful brief overview of the factors to consider as you decide which bank would be the best fit for your financial needs.
• Luthuli is an independent financial adviser and founder of Luthuli Capital.