Do you often think that your business works for your bank, instead of the other way around? Perhaps it was the method in which you selected that “pillar of the community” that set in place which entity would drive the bus and which one would merely be along for the ride.

My generation grew up watching It’s a Wonderful Life during the holidays, and wept while it taught us the eloquent lesson of how much good a bank can do for a community and vice versa. Deep down, many of us want to believe the following, as George Bailey told Mr. Potter:

“Why my father ever started this cheap, penny-ante Building and Loan, I’ll never know. Just remember this, Mr. Potter, that this rabble you’re talking about…they do most of the working and paying and living and dying in this community. People were human beings to (my father), but to you, a warped frustrated old man, they’re cattle. Well, in my book he died a much richer man than you’ll ever be!” Alas, those days are gone, I fear.

Choosing a bank for your business involves more than opening a new account at your personal bank or picking the branch office nearest your company. You need to understand what services your business needs and how much they cost. Ideally, you will find a banker who will take the time to walk you through how to solve a problem, so you can go back to working on the business, not in it. Still, some business owners may spend more time shopping for a $300 printer for the office than they would shopping for a bank. Here are some thoughts on choosing the right bank for your business. Already have one? Let’s see how good of a decision you made then, shall we?

What most banks offer vs. what you need

I chuckle every time I hear the dead-pan delivery of comedian Steven Wright: “I saw a sign that said 24-Hour Banking, but I don’t have that much time.”

Chances are there are dozens of banks in your neighborhood that offer basic services—such as free business checking and savings accounts, credit and debit cards and online banking. Many offer businesses other services such as loans for commercial real estate, equipment and general business lines of credit, and SBA-backed and term loans.

To meet the needs of growing enterprises, business banks may recommend a company take advantage of services such as wire transfers, merchant credit card processing, wholesale lockboxes and—one of the newest, ground-breaking options—remote cash deposit. Some even extend themselves by offering specialized services like payroll, retirement accounts, insurance and discount on hotels, shipping and office supplies.

Don’t become so enamored with all of the options. Calmly make a list of which services your business absolutely needs, would like to have, and/or have no use for. From the very start, your business should be on the lookout for a supportive and reliable bank. Finding the bank that fits your company’s current and future needs is crucial.

View your banking arrangements as a long-term relationship. Consider not just what you need immediately, but services you may require in 18 to 36 months. Because the bulk of small business loans come these days from smaller community banks, it is advisable to establish a good relationship with your bank before your business needs outside capital. 

You want to find a banker who understands your business, marketplace and industry, including your creditworthiness and your seasonal borrowing needs. Ideally, your banker will see a customer’s growing business as an opportunity to provide more useful services and will listen if you run into a financial emergency. Take note of the five Cs of lending that most banks will assess when considering your loan application:

·         Character—the highly subjective evaluation of the business owner’s personal history

·         Capacity—an evaluation of the company’s ability to repay the loan

·         Collateral—business assets that can be sold if a borrower fails to repay the loan

·         Conditions—an overall evaluation of the general economic climate and the purpose of the loan, and

·         Capital—the business owner must have her own funds invested in the company before a financial institution will be willing to risk any of theirs.

Nowhere else than choosing a business bank does age-old adage “People buy from people who they like, trust, and with whom it is convenient to do business” hold true. Once you’ve established a relationship with a banker, meet with him or her at least once a year and offer an update on your company’s finances.

Even so, it’s a good idea to interview branch employees and managers at competing lenders every few years and gauge their willingness to devote time to a single businessperson. Although switching banks can be a hassle, you ought to let your banker know you aren’t afraid of “shopping around”—it keeps them on their toes.

Fine-tuning the quest

Prior to doing the research for this column, I had little idea about what I, as a business owner, should look for and insist upon before settling on my business banking partner. Here is a good list of things to ask a candidate to be your banker:

1.      Hours of operation and accessibility—Today’s bank branches are rapidly evolving into resolution centersrather than the venue for making basic bank transactions—such as deposits and withdrawals. Most business owners work during weekday hours, so look for the flexibility to be able to deposit money late in the evening and weekends, or via mobile apps. Still, look for a bank that has a good number of branches nearby and has generous hours it’s open.
 

2.      Funds availability—When you make a deposit, how long does it take to post to your account and become available? Banks range from same day to three days, so this is an excellent question to ask.
 

3.      Monthly transaction limits, minimum balances and fees—Most banks are going to offer you a suite of business tools—like free checking, online bill pay, QuickBooks compatibility, free credit cards and others. The only way to differentiate between banks will be the fees and conditions. Consider the number of transactions, checks and transfers you are going to have on a regular basis. Run those scenarios by each prospective bank and evaluate the fees you are likely to incur. I’ve seen limits on number of monthly transactions range from 50 to 300 without additional costs in the banks I’ve researched. Ask each one this question and gauge their response: “If my banking needs remain unchanged in foreseeable future, will I be grandfathered in at these minimum balances and fees? I don’t want my costs to go up if my needs don’t change. Of course, if the bank wants to lower my minimum balance or fees, I’m all ears.”
 

4.      ATM fees – Although the banks I researched offer debit cards, only a handful of banks offered free use of their card on other bank ATMs and fewer still offered refunds on the fees those other banks charge for using their ATM. I don’t use an ATM a lot with my business, but it’s nice to know that when I do, I’m covered.
 

5.      Personality and expertise of bank staff - As a business bank client, you’ll be dealing with the tellers and bank manager a lot more than the average banking customer. Make sure they’re the type of people with whom you prefer to work. You can easily judge bank employee morale by the way they serve you. And, accurately predict how well the bank will treat you as a client going forward. Try asking yourself some of these questions:
a.   Am I readily recognized as a valued customer of my bank when I enter the branch or do I have to show my ID to a familiar teller every time?
b.   Does the person assigned to your account routinely travels to their clients’ place of business or is it customary for all business meetings and consultations be conducted at the bank branch?
c.   How long has the loan officer been with the bank? What is her expertise and level of experience in working with small and mid-sized businesses?
d.   Does your local banker have lending authority? What’s the largest loan he or she can approve without checking with higher ups?
 

6.      Reputation of bank – Make sure you do some online research and ask your friends/other entrepreneurs about the bank you’re thinking of using. Some banks have a bad reputation and you probably want to avoid those. Make it a habit to ask any or all of the following questions:

• Have they posted a profit or loss in the last four quarters?
• Are their earnings decreasing or increasing and does the bank have adequate liquidity?
• Are they in the middle of a merger or have they recently been acquired? Have they been mentioned in the media recently in not-so-complimentary news items?
• Is the bank on the SBA’s current list of top small business lenders? Does the bank have a business division focused on lending to small and medium-sized companies?
• What efforts is the bank taking to combat fraud and identity theft? Have they heard of attempts by scammers to access business bank account information via phony communications—such as phishing (fake emails), vishing (voice mails), or smishing (text messages)?

Final thoughts

A good bank can prove to be an invaluable partner to a small business, not only helping its owner to borrow capital and managing cash flow, but also working with him or her to plan for the future and assure potential customers of the business that it partners with banks that are cutting edge, stable and upstanding. Put as much effort into finding the right bank—and nurture that relationship—as you would put into landing a big customer or hiring a new member of your management team. Good luck!