How To Choose a Business Bank
 By Patrick L. Wynne

Most small-business owners rely on what is often referred to as a triad of business advisors for outside expertise: their attorney, accountant and banker.

Here, we’ll take a look at the most important factors to consider when choosing your business bank.

Understanding The Banks
The first thing to remember is that all banks are not the same – far from it.

There are very large super-regional banks, with hundreds of billions of dollars on deposit and thousands of branches nationwide.

Smaller community banks are usually locally owned and may only have one or a handful of branches.

Credit unions, which aren’t really banks, can provide most of the same services as a bank, often at a lower cost.

So the first step you should take in choosing a bank is to decide what you specifically need from your financial institution.

Choosing The Services You Need
For starters, almost every company needs a business checking account, and any bank can provide that.

If all you need is basic business checking with no frills (like earning interest or sweeping funds between accounts), you should be able to find a bank that offers free basic checking with no minimum balance, a free debit or ATM card, and free online banking.

The next most common business service provided by banks is lending money. While you might not need to borrow money now, you should plan for a day in the future when you may need a loan to help grow your business or finance working capital.

Interest rates are important, but they’re not everything. Some banks specialize in small-business financing, while others view it as too risky and tend to shy away from it. Be sure to choose a bank that is willing to work with small businesses like yours.

Most banks also provide services that can help you manage your company’s cash more effectively, such as lockbox services, sweep accounts and account reconciliation.

If your business finances are relatively complex, you should ask about these services and how much they cost.

And most banks also offer investment services, like business CDs and interest-bearing business savings accounts, which can help you put your excess funds to work.

Shopping For A Bank
Before you start shopping for a bank, ask your attorney, accountant, chamber of commerce or business colleagues for recommendations. Also visit potential banks’ Web sites, where you can learn about the types of accounts and services they offer before you visit a branch.

Convenience is one factor to consider. If you have to visit a branch for your business, be sure to choose a bank that’s near your office. Or if you travel frequently and need to visit branches on the road, choose one that has a nationwide network of branches and no-fee ATMs.

Another big factor: fees. When evaluating the different services you intend to use at a bank, be sure to compare fees for everything from stop payments and ATM usage to overdraft charges and low balance fees.

Once you’ve narrowed down your choices, visit each bank and ask to meet the branch manager or commercial loan officer. Tell him or her about your business and the kinds of banking products and services you think you need, and listen carefully to how the banker responds.

Remember that your banker will be one of your most important business advisors, so you want to pick someone with whom you think you can work well. You should also choose a bank and banker who will be willing to grow with your business.

Generally speaking, local community banks tend to be better structured for enabling personal, long-term relationships between bankers and small-business owners.

Bankers at larger institutions tend to move around from branch to branch. However, larger regional banks tend to offer a wider array of more sophisticated banking products and services.

About Online-Only Banks
Finally, you may be wondering about online-only banks. These banks don’t have any physical branches; rather, all banking is done via the Internet, mail or ATM machine.

Online banks’ fees tend to be lower, since they have much lower overhead than traditional brick-and-mortar banks, but there is a big trade-off in service.

With an online bank, you won’t be able to establish a relationship with a banker. And the lending products offered to small businesses can be limited.

(Posted November 2007)

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