Are you happy with your bank? I’ve got the sense many small business owners are not. I think after your bank turns you down for a loan, as so many small-biz owners have experienced in the past two years, it’s kind of all downhill for that relationship.
When I asked Sterling Bancorp in New York for advice on how to evaluate your bank relationship, they sent me a handout that bank president John Millman put together. So clearly I wasn’t the first person to ask.
If you’ve been wondering whether another bank might serve your business better, here are Millman’s questions to consider before deciding if it’s time for a change:
- What do the bank’s financials look like? These figures should be readily supplied, if not, watch out. Look at the profit and loss figures for both your current bank and any bank you’re thinking of switching to. If losses are piling up or the bank is too highly leveraged, beware. No use switching to a bank that’s about to be shut down.
- Can you get a loan? If you’ve got your company checking and credit card accounts with a locally based bank and it still won’t lend you money, it’s time to investigate other local banks to see if your loan application would fare better there.
- Are fees rising while service slides? Among the warning signs Millman spotlights are rapid staff turnover, increased fees without explanation, and any recent moves to cap or reduce your credit line. I’d add “can’t get anybody to return your calls or sit down with you” as a major warning sign, too. My favorite: When you walk into a national bank and ask a question and they point you to a phone that’s hardwired to their call center. As a business owner, you deserve better.
- Is technology and security a strong suit? If you transfer your business from a larger national chain to a smaller bank, you may experience a technology downgrade. Be sure to ask questions of any prospective new bank to find out whether it is innovative and current in its use of technology.
- Can your bank see you through a rough patch? Ask yourself what your bank would do if you ran into trouble on a loan; would it work out a deal, or seize the delivery van you put up as collateral? Does it have a track record of working with companies in Chapter 11? Would it rework your loan to help keep you from defaulting? That’s the sort of bank you’re looking for in the down economy.