by Brandon Reiter
I often see business blogs that recommend “top banks” and other financial products for small businesses. Having worked at a bank, and now being a a small business owner, I have come to notice that most of these blogs either fail to recognize which factors are most important to small business owners, or they’re simply paid by sponsors. I mean, they can’t possibly believe that Axos is the best bank for small business owners. But not to worry I am here to the rescue! This post is an unbiased, unsponsored account of which factors you should consider when selecting the right bank for your small business. Hopefully you can take some ideas away, make your own decision and not fall victim to targeted ads that don’t actually have your best interests in mind. Also, you don’t have to be limited to just one bank! It is good to utilize multiple banks so that all of your precious eggs are not in one basket.
- Accessibility
Even in today’s day and age with virtual banking, it is important to do business with a bank that has real people and has plenty of accessible branches and ATMs in the area where you conduct business. For instance, I work in NYC where there is a Chase on every corner. That makes it convenient for me to pop in to see a banker, or utilize an ATM without having to pay a fee. However, there are plenty of states where Chase does not operate in. Of course, even if I am in NYC but I do a lot of business in Pennsylvania where Chase does not operate, it might not be my best option.
2. Fees/Balance Requirements
Many banks will advertise that they don’t charge any “common banking” fees such as monthly service, checks, wires, and so on. However, for most banks these fees ARE free ONLY IF you maintain a certain minimum balance. Be wary of advertisements from banks that claim to not charge any fees, when they might require you to retain a balance that is beyond your capacity and you’ll wind up paying them.
3. Saving Options
Depending on your business’ cash flow you may be sitting on a idle cash for short periods of time that you can’t put into investments, so it just sits in your bank account. Banks offer different interest rates and some are much more competitive. CDs are a thing of the past as I have yet to see one in the last decade to offer a sensible rate worth locking up your money. Today, there are some banks that offer over 1% APY, which is well higher than most big banks offer (usually in the ball park of 0.4%).
4. Borrowing Options
Whether it’s a Credit Card, a Line of Credit, or a Small Business Loan, it’s easier to borrow if you have a relationship and banking history from the lender. For instance if I have a my checking and savings at Local Bank. They will see how much money I bring in over the course of the time I do business with them. If I talk to my bankers there about my business and they get to know how it functions, when it comes time to borrow money, it is easier to articulate and prove why the bank should loan money to my business at a reasonable rate. It would be much more difficult to walk into a bank without any knowledge of me or my business and ask for a sizeable loan. When considering a bank you want to make sure they have multiple products with real people behind them.
