One of the most important relationships a business owner has is the one with their banker. Along with an attorney and accountant, your banker is part of what is often referred to as the three-legged stool of small business advisors.
That’s why choosing a business bank is one of the biggest decisions you’ll make. Your banker will be one of your key business partners and confidants — someone with whom you will share many of the intricate details involved in running your company.
The New Banking Landscape
Today’s banking landscape is very different from the one that existed 5 or 10 years ago. Banks in the United States have undergone their share of well-publicized troubles over the past couple of years. One result has been consolidation in the industry, as stronger banks have acquired the assets of weaker ones. A number of well-recognized bank names that had been around for generations no longer exist.
For business owners, this industry upheaval and consolidation may mean opportunity, as many banks are refocusing by gathering deposits and leveraging them to make loans within their local communities.
With this in mind, remember that all banks are not the same. There are four main types of banks:
- Regionals and super-regionals: These are the megabanks with hundreds of billions of dollars in assets and thousands of branches and ATMs nationwide.
- Community banks: These are much smaller local banks, typically with hundreds of millions of dollars in assets and only a handful of local branches and ATMs.
- Credit unions: These aren’t really banks but they provide most of the same services that banks do. They tend to be locally focused, like community banks.
- Virtual banks: These banks do not have physical locations or branches that you can visit; instead, all transactions are done online. A number of these sprouted up when the Internet first took off, but many failed after the dot-com bubble burst. However, there are still some online banks that specialize in serving small businesses.
Choosing The Right Bank For You
So which type of bank is best for small businesses? It depends on what you need from your business bank.
Any bank will offer basic business banking products and services, like business checking and savings accounts and small business loans. If you need cash management, investment, brokerage, or trust services, you may want to concentrate on regional and super-regional banks, which offer a wider array of more sophisticated products and services.
In general, community banks and credit unions try to compete on the basis of establishing close personal relationships with their customers, and business owners especially. Larger banks, meanwhile, usually stress more comprehensive product and service offerings and greater convenience, with many more branches and ATMs to choose from. And online banks, which tend to have lower overhead, usually emphasize lower costs and higher rates on deposits.
Once you decide which of these factors are most important to you, ask your professional advisors and other business owners for recommendations. Visit bank Web sites to learn more about the products and services being offered, including each bank’s online banking platform, which is crucial for most businesses today. After you’ve done your homework, stop by the banks you’re considering and ask to meet with the branch manager or commercial loan officer.
Tell the banker about your business and what you think you need from a bank. Remember that your banker will be one of your key business advisors, so choose carefully. You should feel a rapport with your banker — they should be someone you like and feel comfortable with, and someone who will be willing to expand your relationship as your business grows in the years ahead.
Don Sadler is a freelance writer specializing in business and finance. Reach him at email@example.com.