How Do I Choose A Bank That’s Right For My Business?
This is the last of our three part blog series related to financing the day to day cash flow needs of your business. In our previous posts we have discussed what a business line of credit is and how it is to be utilized. We have also discussed how to qualify for a line of credit in terms of how a bank would view your request. This blog post will wrap up the series by offering suggestions as to how to choose the bank that is the best “fit” for your business.
Most entrepreneurs initially try to utilize the bank where they currently maintain their personal accounts to start this process. This may be a mistake, so let us explain why.
Banks usually classify themselves as either a retail bank or a business bank. Retail banks cater to the general public and specialize in providing all manner of bank accounts, credit cards, home equity loans, safe deposit boxes and general individual banking services. The target market for business banks is quite a bit different in that they are looking to attract business of a certain type or size. They do this to meet their banking needs which contain some of the aforementioned retail banking products but also tend to emphasize the installment loans and business lines of credit that we have discussed earlier as well as commercial real estate loans. Business banks do handle the banking needs of individuals, but these individuals tend to be connected to a business that the bank has as a client.
Businesses vary in terms of target market, specialty niches, size and type of clients, approach to customer service, and geographic locations. Banks are exactly the same way. The best rule of thumb that we can offer you in this regard is to take a good hard look at your company, its needs and its values and then do some research related to banks in your area and see what they offer.
The best approach to this type of research is a combination of internet searches, referrals from “happy” customers in like kind businesses (i.e. – your competition!!) and endorsements from your professional advisors such as your CPA firm who generally know the banks well that are within your geographic area. Generally speaking, larger banks tend to offer less personalized service that is not relationship based, with personnel turnover being pretty constant. Smaller community banks usually stress the better relationship and service aspects but can be more expensive. In either case, wherever you decide to bank, plan on having all of your business needs ( i.e., line of credit, installment loans, checking accounts) at one bank (in almost 100% of the cases, this will be a requirement anyway).
Russ Wertz – Founder and CEO of Wertz & Company, LLP, a Professional Services Firm located in Orange County, CA that specializes in working with entrepreneurs along their journey to success.