By: Nadine Pyter
When it comes to selecting the best bank for a small business, people are most often familiar with big banks that are generally busy dealing with larger clients who can generate more revenue. While big banks are capable and willing to take new business, small business banks operate with the particular needs and concerns of the small business owner in mind. There are specific areas to review and evaluate and understanding the features available to a small business can help in decision making.
Small Business Loans
For a small business that has ever tried to get a loan, it is well known that it is not an easy task. Some banks work with small business clients more than others so when looking for a small business loan, it is advisable to look for a bank that works often with small businesses and regularly gives them loans. Ask bank representatives how frequently they work with businesses of a similar size. Consider asking local businesses and colleagues for referrals. If the bank offers referral promotions this could provide an added bonus.
Brick and Mortar Banks
Many banks today offer online banking with limited physical locations. Additionally, there are some banks that are completely online. Though these options are convenient to the personal consumer, as a business they may not be ideal. For a business that has a lot of cash that needs to be physically deposited, or if there is a personal preference to work with bankers in person, a bank with ample brick and mortar locations is necessary.
Interest Bearing Checking Accounts
A checking account that bears interest is a smart option for a small business that regularly keeps large amounts of cash in a checking account. In the current interest rate environment, it may take longer to find a bank that provides the highest interest possible for a business checking account. If the information is not easily found on bank websites, ask bank managers for interest rate information to compare who would provide the best option. Additionally, inquire about any fees associated with the account related to balance minimums, management, etc.
Online Business Checking Account
For small businesses whose operations entail frequent travel, a bank with an easy-to-use online business checking account is a must. Banks that provide mobile apps may be even more beneficial, as they provide faster access to finances. For online banks that may not have physical locations, they generally allow use of other banks’ ATMs to withdraw money and will reimburse the transaction fee.
Some banks offer rewards as incentives for business owners to bank with them. These rewards can include cash bonuses for setting up new accounts and meeting certain minimums. If these incentives are of interest, inquire if the bank offers them.
Number of Transactions
Many business bank accounts limit the amount of monthly transactions permitted without an additional fee. Analyzing the business’s estimated transactions will help determine whether it is necessary to select a bank that allows the largest amount of transactions at no additional charge.
A small business bank should feel like they are somewhat of a trusted advisor. Look for banks that provide free or low fee business reviews of financials on a routine basis. This type of benefit can save money that might otherwise have to be paid to someone else and help keep business goals on track.
Online Bank Grading Tools
Tracking all bank options can be done in a spreadsheet or with pen and paper. However, using online bank grading tools are the best way to compare and contrast all the options in one view. Recommended tools include the FDIC Bank Find Tool, which identifies if a bank is FDIC-insured, and the Community Reinvestment Act (CRA) Performance Rating Search Tool, which evaluates a bank’s record of meeting the credit needs of its community.
Consider Your Other Options
If the best bank available still does not offer or approve services needed, other options like leveraging personal credit cards, advances, short-term lines of credit, or peer-to-peer lending may be considered. Finding the best bank for your small business is an important task and can help support your business for years to come.