As a small business owner, one of your most important partnerships is with your bank. When you’re choosing where to do your small business banking, it’s important to research which institutions will meet your unique needs.
Now that many financial services are available online, your list of options is growing, and it can be overwhelming to figure out the best place to start. Many banks offer similar features and services, but not all of them will be the right fit for your business as it grows. Here are a few factors you should keep in mind as you look for the right bank for your small business.
Know your business goals and assess your financial history
A critical first step is to review where your business is now and where it’s headed. You should choose a bank that can grow with you. You might not need products like a business loan in the next six months, but you may need one as you build on your success and continue to expand your business in a year. For example, you may need accounts that allow you to upgrade to handle more transactions as you take on clients or suppliers.
If you’ve been in business for a while, take a look at the last 6 to 12 months of financial history and cash flow patterns. Understanding how you spend and receive money will indicate which banking features you’ll need. Do you need higher limits on your credit card? Will you need access to small business loans? Would a business line of credit help you better manage gaps in cash flow?
Check your credit score. If your score is low, large national banks may not approve you for all the products you need. You can always sign on with a major bank or credit union and choose online lending options to leverage in tandem when you need access to additional funds.
As you expand your business, you might want to take advantage of the Small Business Administration’s (SBA) loan programs, which offer affordable financing options to small businesses. Look for institutions that provide SBA-backed loans and resources tailored to small businesses. Also, credit unions and regional or local banks often have programs specifically geared towards small businesses in their area.
Be aware of fees for the features you’ll use the most
Once you have a good idea of your business’s financial patterns, you should look for banks with products and services that help you maintain or improve your finances.
At the very least, you need to have a business checking account to house funds and for your everyday transactions. Some banks charge fees if you do not maintain a minimum account balance, but that may not be an issue if you know that you always have extra cash to keep the balance high.
As you grow your business, you’ll likely need credit cards with higher limits or access to funding options like business loans and lines of credit, which come with their own costs. Additionally, you might need to be able to upgrade your accounts to allow for more transactions throughout the month without incurring extra fees.
If you’re looking into extra financing for your business, always look for options that have a low annual percentage rate (APR), which means the institution isn’t charging too many fees on top of your interest payment. Many online financial platforms offer flexible business credit with low or no additional fees. For example, Fundbox does not charge origination fees.
While you’re looking into ways to save money on your small business banking services, see if you can earn money through the interest rates offered on your desired accounts.
Understand that banking is about building a relationship
Your bank is part of your business. When you develop a relationship with your bank, they’re likely to see you as less of a risk over time, making it easier to secure financing like loans, lines of credit, and mortgages. It’s easier to build a personal relationship with your bank if you choose a local bank or credit union, especially those that are invested in supporting small businesses.
Smaller banks may also have advisory services and resources specifically geared towards small business owners. Developing a personal relationship with your banker or advisor means that they get to know your business and can suggest the best products to help you grow.
Look for banks that have experience in your industry and understand your business. Many national banks have specialized industry bankers who know the challenges that your particular business might face and can recommend more personalized solutions.
It’s helpful to choose a bank that has a physical branch where you can meet with a banker or advisor in person, particularly when you need to resolve issues or when you’re looking for advice about the products they offer.
Don’t forget about convenience
As a small business owner, you’re likely wearing many hats and juggling several aspects of your operations every day. The best banks for small businesses make it as easy as possible to manage your finances when it’s convenient for you.
Online options enable you to handle your everyday banking from anywhere, at any time. However, if you run a brick-and-mortar business, choose a bank with a physical branch that’s close to your location, making it easy to complete regular cash deposits. Ensure that the bank’s hours fit around your business hours so you can spend your time focusing on your customers during that time, rather than standing in line at the bank.
If you travel nationally for your business, you’ll want to select small business banking options that are available across every state, or institutions with low fees for using other banks’ ATMs and services. This is also a major consideration if you travel internationally. Narrow down the options that offer you optimal support and access to your money everywhere you do business.
Ideally, you should choose a bank with the right balance of online accessibility, convenient branch locations, and overall exceptional customer service. Think of your bank as an extension of your business, like a supplier or retailer. The best bank for you is the one that will help you through every stage of your business journey.
Disclaimer: Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.