When choosing a bank for your business, it’s easy to default to an existing personal bank you’ve used for years or a bank that you were talked into at a networking event.
While you may be thinking “all banks are the same”, the fact is that there are some differences between banks and the costs of choosing the wrong one can add up over time. You should be running your business, well, like a business, as cliché as that sounds. When you make decisions, it’s important to weigh all factors. Here are a few things to consider when choosing the best bank for your business.
1) Know the bank transactions your business will use
Some businesses have very few expenses and rarely use their bank accounts at all, while others have dozens of transactions every single day. The ways in which you’ll use your bank will dictate some of the important features you want to consider. For example, if you can only have 15 debit transactions per month before incurring service charges but your business incurs well over that amount, you should consider other options that don’t require excess costs. Some questions to ask yourself include:
How many debit and credit transactions does my business require in an average month? (yes, this means diving into your financials and analyzing the data)
Are most of my expenses required to come out of a bank account or can a credit card be leveraged for reward points?
Are my business transactions electronic (utilizing EFTs, Wires, etc.) or do I write physical checks/money orders?
Do any of my business transactions require me to physically travel to the bank or can I complete transactions online?
2) Research the perks and offers available at each bank you’re considering
Banks nowadays have no shortage of features to make them more competitive. These features can be quite advantageous depending on the objectives of your business and how you’ll use the bank accounts. Some of the attractive features you should consider based on your priorities include:
Ease of online banking (ability to complete transactions completely remote) if your business can operate with an online bank
Reporting capabilities and ability to link to accounting software
Promotions such as getting a free dollar amount for opening an account (ex. Get $500 when opening an account with a balance of $1,000)
Credit cards available through the bank that offer reward points for common purchases in the business (ex. reward points for travel if the business consistently purchases flights/hotels, etc.)
No monthly service charges or fees (usually there is a minimum balance and if you’re a small business and don’t have a lot of cash on hand, be sure to consider banks that don’t have service charges or are more lenient)
3) Recognize the value of customer service
With the emergence of online banking, you may consider your bank experience to be transactional in nature, but that could not be less true. Customer service extends beyond the physical presence of a lobby and can make or break an experience, even if it’s virtual.
A great example I use is my own personal bank experience. I chose to go with a local bank because of a relationship I established with one of the bank representatives and when I was opening all of my bank accounts, I didn’t realize there was a service fee associated with one of my accounts. This was clearly stated and was just a small thing I overlooked. I shared my surprise with the customer representative and she explained that she would waive the fee until my balance could reach the requirement.
The point isn’t to find a bank that will bend the rules but to find one with a level of customer service that can really make a difference. The fact that I have someone working really hard to make me happy validates my belief that this bank was the best for me and I hope you can find a similar one for your business.
4) Look at interest rates available
You may be surprised to see that I’ve listed interest rates as the last factor to consider; I am a financial planner after all so numbers are important! Yes, all of that is true, however, I wanted to emphasize, that as with many things in life, the pure numbers are not always the highest priority. The bank you choose for your business should allow you to do business efficiently, effectively, with low fees, and with a culture that matches your own. All of those things paired with the fact that interest rates are already nearly non-existent right now leads me to say that it is important to look at interest rates on savings accounts, money markets and CDs but that it is certainly not the only thing to look at.
It would be a smart practice to list all of the pros/cons of the banks you are considering and have respective interest rates be a data point as part of your decision-making process, not the data point.
As with every decision you make in your business, it should be weighed against alternatives, thoughtful, and logical. As the business owner, you should be able to articulate the reasons you chose the bank and when/if that bank is no longer serving you, be able to swiftly move to another option that optimizes you and your business’ health. Good luck!