In our previous blog post, we discussed the rise of credit unions and their new status as the winning banking option for small business owners thanks to their low-fee accounts, lower loan rates, and customer service.
Banks have had a bad rap in recent years due, in part, to the financial crisis and the rising cost and difficulty in obtaining business loans. Despite this, banks do offer small business certain services and benefits that are still worth considering:
Accessibility
Banks are still more prevalent on the ground compared to credit unions (whose mission is to serve local communities). ATMs are plentiful, branches are open at weekends, and online services and apps make the business of monitoring and moving cash around a breeze.
Rewards
Banks continue to lead the pack when it comes to credit card reward programs. According to Bankrate.com, “…of the 50 credit cards in the 2012 Bankrate.com Credit Card Rewards Survey, only five cards were issued by credit unions. While some cards issued by banks offered up to 6 percent cash back in certain spending categories, credit-union-issued credit cards topped out at 1.5 percent.”
Personal Banking Track Record
If you’ve been banking with one bank for years, then you may stand a better chance of getting a loan or line of credit approved based on your loyalty. Be warned though, thanks to consolidation and the decline of one-to-one relationships, banks today tend to focus solely on credit history when assessing the loan-worthiness of small businesses. So if your credit score isn’t great (below the 600-650 range), don’t even thinking about applying for a loan through your bank.
Familiarity
People don’t like change. If you’ve been banking with one financial institution for years, the thought of moving all your money somewhere else might not appeal. Or perhaps you have a great relationship with your local community bank that you don’t want to lose.
Don’t bury your head in the sand though, if you know that a credit union can offer better rates or services, talk to your bank and see what they can do for you. They may be more flexible thank you think, especially if you bank with a community bank as opposed to a “big bank.” Read more about Community Banks vs. Big Banks from Bankrate.com.
Weigh up the Pros and Cons
Credit union or bank – which is right for your business? Weigh up the pros and cons of working with each. For example, if you’re on the road a lot a traditional bank may offer more convenience. If you pay off your credit cards each month, you may be able to enjoy the robust rewards programs offered by banks.
Businesses who are looking to save or borrow will probably find that credit unions are hard to beat.
If customer service is important to you, then you may want to join the growing body of customers who love the community fostering and personal relationships that credit unions do so well.
It’s hard to ignore the positives of putting your business banking in the hands of a credit union. But if you’re not sure, open a credit union savings account and at the very least take advantage of the low fees/higher returns while getting a taste of a new type of banking relationship.
