When you start a small business, you face many challenges. Although some may not consider shopping for a bank as one of these challenges, it is a major decision you need to make within the first few weeks of operation.
Choosing the right bank specifically means looking at the services a bank offers and making sure such services fit your small business needs. Outlined in the article “How to Shop for a Bank”, published in the Wall Street Journal (WSJ), there are three key issues a small business owner should consider before opening a business account with a bank:
- Lending authority – Find out first if there is a limit to your banker’s lending authority and how much they can approve on their own before speaking with management. Keep in mind that sometimes the smaller, more regionally focused banks allow you to meet with a loan officer more freely, and may even consider your character, rather than just your credit, in the loan approval process.
- U.S. Small Business Administration loan system – As a startup business, it’s helpful to you if your bank works with the SBA loan system. SBA guaranteed loans protect financial institutions against default and sometimes have more flexible repayment terms; therefore try to shop for a bank that is comfortable working with the SBA loan system.
- Extras – Ask if there are any additional services or extras attached to your account, and inquire about their costs. You also want to perceive your relationship with your bank as being long term, so services or extras you may not need now you could really need in 6 months. Comparison shopping for extras a bank offers is crucial, especially when it comes to keeping more money in your pocket, and in your business.
When you are comparison shopping for a bank and reviewing all the services these banks are offering you, the WSJ article says it best: “You want to find a banker who understands your business and industry, including your creditworthiness and your seasonal borrowing needs”. Your banker should continually provide the support your growing business needs to succeed. If you’re unhappy with your bank, start to shop around by reviewing the other banks in your area; keeping in mind these three tips, you’ll be able to find the right bank that fits your small business needs.
The Inland Empire SBDC offers no-cost counseling to help small businesses start and grow. To schedule your no-cost appointment, call the SBDC today at (951) 781-2345.