You may be in the fortunate position of several banks knocking on your door wanting your business. Follow these guidelines to select the bank that’s right for your company:
1) Deposit Availability and Checking Account Fees – When you run a business, the ability to deposit funds quickly and have immediate access to those funds at the lowest cost is paramount. Ask for a checking account fee schedule, the bank policy regarding funds access and a list of branches. If a particular low-cost bank does not have branches close-by all your locations, don’t immediately rule them out. Instead, inquire about mobile deposit options.
2) Loan Rates – Small banks often have prime rates that are 0.5% to 1.0% above the Wall Street Journal published prime. Ask for the bank’s actual prime rate.
3) Loan Policies – In general, when it comes to loans, banks are one of two types: asset-based lenders or cash flow lenders. If you have lots of unpledged assets, an asset-based lender may be your best choice. If not, select a bank that bases loan decisions on cash flow.
In addition, if personal guarantees are an issue with you, asset-based lenders are more inclined to require guarantees. However, cash flow lenders will put a greater emphasis on loan covenants and generally require more frequent reporting such as monthly or quarterly financial statements.
4) Loan Limits – Ask for the bank’s lending limit, especially if you anticipate increased loan needs in the future. When you reach a bank’s lending limit, your bank is forced to sell a portion of your loan to an outside bank, possibly making future negotiations and transactions slow and difficult.
5) Automation – Your ideal bank should make banking incredibly easy through sophisticated automation. You already have online access to your accounts with the ability to do just about any transaction, including payment or collection by EFT (electronic funds transfer) from your office. Is mobile banking an option?
6) Employee Benefits – Banks often offer an attractive array of benefits to your employees including free checking and reduced loan rates. These benefits, at no cost to you, can be useful in attracting and keeping good employees.
7) Industry Track Record – Some banks are notorious for getting in and out of specific industries Others have shown a long-term commitment to specific industries. Make sure the bank you select is firmly resolved to go the long haul with you and your industry.
8) Employee Turnover – Inquire about the longevity of key personnel (commercial loan officers and branch managers). Banking is about personal relationships — it’s tough to have close relationships when the players keep changing.
A cooperative, low-cost bank can be key to your long-term financial success. Select yours carefully.
