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Choosing a Bank For Your Small Business

Small Business Finance

Choosing a Bank For Your Small Business

Looking for a good small business bank? It's important for every business owner to find a bank (and a banker) that will contribute to the success of their business.

How should a small business owner choose a bank or financial institution? Here are some important things to consider when selecting a bank.

What do you need a bank for?

Unfortunately most business owners don't thoroughly consider their needs when selecting a bank. Consider some of the things your banker will help you with. They can:

Establishing a basic checking account that will let you pay your suppliers and deposit revenues from your customers
Provide special loan programs for small businesses, including SBA loan programs and other government-guaranteed or agency loans.
Provide advice regarding what it will take to qualify for the loan that best meets your needs.
Assist you with the cash management needs of your business.
Offer investment products of varying maturities: overnight to long-term certificates of deposit.
Offer investment products of varying risks (and thus returns): treasury securities and insured deposits to other stocks and mutual funds.
Assist you with finding financial information on your industry (such as RMA Annual Statement Studies, Dun and Bradstreet reports, etc.)

Build a Relationship for the Future

It's a good idea to establish a close relationship with a banker before you need money. The right banker will be someone that understands the needs of emerging and growing businesses. They will be interested in your business dreams and will help you achieve them.

All Banks Are Different

Although there are laws and regulations that govern the activities of banks, savings and loans, credit unions and investment firms - not all financial institutions are the same!

Each institution establishes its own policies for:

types of products and services that are offered,
criteria for qualifying for a loan,
minimum balances for accounts,
interest rates and
charges for account services.

So while one bank may specialize in home loans, or auto loans another may focus on commercial loans for businesses. Some banks may only offer basic deposit accounts while others have lock box services, sweep accounts, and even online banking! That's why we stress the importance of evaluating your business needs before you select your banker.

How to Find a Good Bank

Here's some advice that will be helpful towards your finding a good bank:

Approach the decision as a long-term investment.
Ask your accountant or lawyer to introduce you to bankers that they are familiar with.
Check with your local chamber of commerce to find out what banks are active in the community. Attend their meetings or other service organizations to meet bankers that are involved and have interests similar to your own.
Look for a complementary personality, someone you can relate to.
Introduce yourself to the banking center manager. If you are looking for a loan, ask to meet the loan officer that will be assigned to you.
Find out how long they have been in their current position (bank managers and officers change locations and get promoted).
Tell them about your business and the form of organization so they can tell you what special products and services or restrictions might apply.
It is not likely that you will make a decision on pricing alone, but do compare interest rates on deposit accounts and basic consumer loans (most business loans are negotiated, so the rates won't be posted at the banking center). Also, look carefully at the charges for services if your commercial deposit account will billed on analysis.

Comparison Shop

Banks are desperate these days to attract small business accounts, so it's worthwhile to shop around.

These days, you can usually get free checking and no account fees. If you are paying $20 or so per month for things like account analysis, it's time to switch banks. There are better deals available, and there's no sense throwing away money.

Make sure you compare financial institutions in order to find the one that will serve your business's needs and will also provide support and assistance during the infancy stage of your business. Selecting an institution that you can work with will be especially important as your business grows. Start gathering information as soon as possible to help you make this important selection.

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Please share your comments regarding choosing banks. Do you have a good small business banker? A bad small business banker? What should entrepreneurs look for when choosing a bank? We welcome all comments, tips, advice and suggestions.

Izzy posted on 3/21/2007

This info was helpful, I've been in business for four years and am looking to possibly change banks. This article made me aware that I should do something to perhaps better the deal that I'm getting now.
kelly posted on 3/29/2007

Thank you. This was very helpful. I'm in the infancy stage of my business currently and am finding it difficult to choose the right bank for me. Cheers!
Mary Yelton posted on 10/22/2007

I have a small business. I have been banking with the same bank for twenty years. I've been in business for two years, and I want to bank with someone who is compatible with my accounting software for download purposes. It's unfortunate that many banks don't invest in technology to support small businesses like mine.
Sgrieger posted on 1/31/2008

This is a GREAT article with excellent advice! We have a ton of competing banks...but it seems no one offers a unique advantage to small businesses. Do the homework when looking so your small business can get not only the services you need but also maximize the funds you get for growing your business!
Personal Training NYC posted on 1/13/2009

Thanks for the advice. I'm curious whether small banks are generally better for entrepreneurs than large banks? Maybe you could address that question in another article.
aden posted on 5/20/2009

I like the way you've explained how to choose a bank. I was wondering if someone could answer this question for me. What is relationship banking and why might it be advantageous to small businesses? Thanks. Aden
NEIL MORROW posted on 10/5/2010

I've been trying to get a small business loan on my business but keep geting turned down. Can anyone help me find a bank that is willing to work with a small business?
Oasis Virtual Solutions, LLC posted on 12/29/2010

I enjoyed your article. It was very thought provoking and caused me to look at issues I had not paid attention too before, while considering which banking institute to choose. However, I am in NYC and we literally have thousands of banks to choose from; which makes the decision all the more confusing and that much more important. Do you have any specific recommendations of Banks based on their know business practices in the area of small biz?
Ken Gaebler posted on 12/30/2010

As far as the best NYC small business banks go, I'm not up to speed on New York small business banks. If you were asking about Chicago small biz banks, that'd be a different story. Your best bet is to ask some local New York City entrepreneurs for referrals. Good luck!
CKWimberly posted on 1/3/2011

Do you have a perspective on good Chicago banks or good online banks for small start-ups? I am interested in banks offering free business checking that don't get you with other hidden banking fees.
Ken Gaebler posted on 1/3/2011

CKWimberly, as far as good Chicago banks for small businesses and startups, I've been happy with Chase Bank. A TCF small business banker once showed me a matrix that he thought showed TCF Bank was the best banking choice for small businesses, but I'm not a fan of having to go to a grocery store to do my business banking. I'm also not a fan of Bank of America or Citibank, due to fees. Hope this helps you find a good bank for your Chicago small business. Anybody else have any input?
CK posted on 1/5/2011

Ken, did you get a loan from Chase? Do you know if they play nice with lending for SBAs? Any recommendations will be greatly appreciated. I would also stay away from First American Bank. They took away my credit line.
Ken Gaebler posted on 1/6/2011

CK, I didn't get a business bank loan from Chase per se but I did get a line of credit to draw on if necessary. In the end, we did not need to draw on the line because our cash flow was good and we didn't need credit. But it was nice to have. My business was a services company so we didn't have any collateral. Chase didn't seem to be very interested in lending to businesses without hard assets for collateral. That is the impression I've gotten anyway. As for Chase and SBA loans. I don't have any personal experience with that, but I believe they are SBA preferred lenders, and should be able to secure an SBA loan for and with you.
Pamela Bellah -Realtor posted on 1/25/2011

Any recommendations for a good small bank for Seattle?
Ray Shutley posted on 2/13/2011

I am looking for a bank. I had a bankruptcy in 2005. But i have come out of it and still have plenty of drive and need to expand. I need a bank that knows how and why people start a business. My life has been in pursuit of life, liberty and the need to help others and myself. I need a bank to loan me a line from year to year in return for my account and my purchases for the businesses. Can anyone suggest a good bank for me?
Ron posted on 6/4/2011

I operate a small therapist placement business and have been disatisfied with my current bank. I would like to receive information regarding banks in and around Orlando Florida that are truly interested in working closely with a small business for the long term.
Ron posted on 7/6/2011

For those of you in the Chicago area, I like North Community Bank in Chicago. They also own a lot of smaller banks, and do have business loans. I actually have two friends that got their business loans from them as well. They are a no frills, no bills type of bank, where the branch manager and asst. mgr is sitting right there when you walk in. I pay no fees, either.
BusinessOfBanking.com posted on 9/3/2012

Here's a quick tip. If you carry out relatively few transactions or have a reasonable sum held in your checking account, you can usually get a free business checking if you shop around banks. Hope that is helpful advice to someone out there.
Natasha Washington posted on 6/13/2015

Hi, I am starting my own home health business and I was trying to find the best bank to bank with for my small business in Vicksburg, Mississippi. Could you help me please?