Buyer's Guide

Our purchasing experts provide exclusive, impartial advice to guide you through your buying decision.

Step by Step Guides
Business Advice

How to Choose a Bank for your Small Business

Ten Key Things to Consider

Written By: Behram Panthaki, Sr. Director, Strategy and New Ventures

There are approximately 21.2 million small businesses with fewer than 20 employees in the U.S., (U.S. Small Business Administration, 2007). When it comes to banking, the needs of small businesses straddle the line between retail banking online offerings – which are feature-light – and corporate offerings – which are overly complex and costly.

Traditionally, financial institutions have not provided online offerings targeted to meet the unique needs of small business. And until recently, banks did not have a proper channel for small businesses to conduct cash management services effectively.  

However, in recent years, this has started to change. Financial institutions have realized that small businesses need more comprehensive and targeted services to meet their specific needs. Many banks are now capitalizing on this growing customer segment by offering more specialized services for these customers. Large banks such as Bank of America, Chase, and Wells Fargo are examples of industry leaders who have dedicated time, resources and services to better serve this critical customer segment.

While the growing availability of small business banking services is a welcome trend, the rapid introduction of new small business products can make choosing a bank for your business an arduous task. Features such as small business advisors, convenience and online capabilities should all factor into choosing which financial institution is right for your business.

CashEdge, a leading provider of small business solutions for online invoicing, payments and funds transfers, and the pioneer in Intelligent Money MovementTM for financial institutions, has keen insight into this topic and has compiled the following recommendations to help small businesses select the perfect banking partner.

  1. Small Business Advisory Services: Does your bank have a specific small business unit?  It is important that you have an accessible small business banker who understands your needs and is available to provide you with advice on the financial management of your business. When you have questions, you want to make sure that the person who answers is knowledgeable and understanding of your situation.

  2. Robust Online Capabilities: Your banking should be done on your schedule, not on your bank’s. Normal banking business hours may not be your normal business hours, so be sure to ask your banker which services are available online. Online capabilities not only save you time and money, but they also allow you to focus on other aspects of your business.

  3. Flexible Cash Management Services:  It is important that your banking partner offer services created to meet the specific needs of small businesses, such as online cash management services. These services should include solutions to streamline both accounts receivable and accounts payable processes.  Accounts receivable services should include the ability to create and electronically send invoices as well as the ability to receive electronic payments from customers.  Another useful feature is the ability to schedule electronic reminders for outstanding invoices.  Accounts payable services should include the ability to make electronic vendor, employee payroll and tax payments. Expedited electronic payments is an important feature that enables you to meet urgent payment needs while avoiding costly overnight mail fees.  Having access to all of these services through your bank enables you to centrally track all invoices and outgoing and incoming payments in real-time.

    Another service to look for is the ability to do account-to-account transfers.  As a small business owner or manager, it is likely that you will have personal bank accounts and maybe other small business accounts either within the same bank or across financial institutions.  Many banks offer the ability to electronically move money across your accounts both within their institution, as well as across financial institutions.  This flexibility allows you to not only better manage your small business cash flow needs, but also to stay on top of your personal finances at the same time.

  4. Small Business Lending Services: Research the bank’s lending services.  When your business needs grow, you want a bank that can grow with you. In some cases, it may be easier for you to qualify for a loan if you have a prior relationship with the bank. Regardless, make sure that your bank offers everything you need, and know that loan services are there if and when you need them.

  5. Security: Make sure that your bank has security measures in place to protect you and your business. Ask your bank what kind of fraud protection measures are in place so that you can be confident that if something were to happen, you are protected and your business can operate as usual.

  6. Customer Service: If you have a banking question or a problem, is the customer service readily available? Is there a call center that is open “after hours?” Is there a comprehensive online help center? Be sure that your bank has customer service representatives and hours that work for you. When looking at a bank’s website, check the FAQ portion of the website; see if there is a comprehensive list of questions and answers, that way, when you really need answers, you’ll know if the website will be helpful.

  7. Remote Deposit Capture: Does your bank have the ability to do Remote Deposit Capture? Remote Deposit Capture enables businesses to scan checks and transmit the scanned images and / or ACH-data to a bank for posting and clearing. This feature reduces the total processing time of checks, accelerating clearings and the availability of funds, which will result in improved cash flow and working capital for your business. 

  8. Interest Rates: Research and compare the interest rates that banks are offering on small business savings accounts.  With inter-institution funds transfer capabilities, you can have your money work for you in a high yield account, and when you need it, you can transfer money into your main small business checking account.

  9. Fees/Minimum Balances: Some banks offer free small business checking and others require a minimum balance, or monthly fees. Be sure that you are aware of any charges you may incur, including transfer fees and monthly maintenance fees. Researching these before-hand could save you money and headaches down the line.

  10. Merchant Services:  If your bank offers you merchant services, then it can simplify the process of collecting payments from customers for any type of card transactions, including point of sale, online and telephone transactions. Understand and compare the fees associated with these services.

With these factors in mind, you should comparison shop when choosing a bank. Make sure you are comfortable and happy with your bank choice. Once you make the right choice, your small business bank will become a partner in helping you better manage your business.

Find Pre-screened Vendors

Compare top rated vendors in more than 80 categories. Minimize the risk of hiring unknown contractors

Visit the Vendor Center now or select a category below:

Related Articles
Compare Top Rated Vendors
Grow Your Business with High Quality Referrals