How To Choose A Bank For Your Small Business

By MELANIE LINDNER
Posted: 2008-08-20 12:30:38
Filed Under: Small Business Finance, Small Business
Forbes.com

Your bank should be more than a repository of cash. It should make life easier, offer guidance and support, and not charge whole body parts for the privilege.

While banks aren't exactly playing fast and loose with their capital these days (for more check out The Real Scoop On The Credit Crunch), small businesses still remain an attractive market. Courting a relatively small number of large companies can leave scars; meanwhile, there are more than 21 million U.S. companies with fewer than 20 employees looking for attention.

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    As information-technology systems continue to improve, serving smaller customers has become an imperative for giants like Bank of America, JPMorgan Chase, Wells Fargo and Citigroup. Large banks (those with assets of more than $10 billion) now dominate the micro-business lending market (defined as loans under $100,000), accounting for two-thirds of the total number of loans written as of June 2007, estimates the Small Business Administration's Office Of Advocacy.

    How to choose your financial guardian? This is a daunting question for two reasons. First, it's hard to do any kind of apples-to-apples comparison of products and services. Second, banking at its core is all about relationships--and it's hard to know with whom you might truly connect until you make the effort.

    Still, you don't have to make this decision in the dark. There are a handful of traits that any serious entrepreneur's bank better boast.

    The first: online services. In today's hyper-competitive environment, dashing to the bank during daylight hours is a quaint notion for many busy entrepreneurs. "The Internet is having a huge impact on small businesses," says Sanjeev Dheer, chief executive of Cash Edge, a Manhattan-based software developer for more than 600 banks around the globe. "It allows them to be more accurate and efficient than ever before."

    Look for online cash-management (which eases the sending of invoices, collecting of payments and cutting of payroll checks) and loan-application services--often free for small-business depositors. Bank of America and JPMorgan Chase have gone a step further, charging as much as $15 per month for additional online services, such as transferring money among different banks and creating custom-logo invoices.

    Next on the menu: specific industry expertise. Not all banks are comfortable financing companies in certain industries or in certain stages of their growth cycles, notes Bob Siewert, director of the Center for Commercial Lending and Business Banking and senior vice president of the American Banking Association.

    The good news is, in recent years, large national banks have brought on advisers specifically to serve small-business clients. Determine up front if you and the bank are a good fit. Example: If yours is a relatively young company, find out if the lender has an established Small Business Administration loan-guarantee department.

    Some banks have branches that cater to specific industries. Citibank recently opened a branch in Napa, Calif., to serve wine-industry entrepreneurs. Says Siewart: "The advice a bank can provide is equally important to the product or service."

    How will you know if you're getting ripped off? To be honest, you probably won't. Banks use different names for essentially the same services; they also bundle services in different ways, making direct price comparisons very difficult. While Bank of America lumps checking, credit-card and bill-payment services into one basket with an annual fee, for example, Wells Fargo offers them a la carte and charges every month.

    Then come all the choices within each service. Take business credit cards. JPMorgan Chase offers 10 different flavors; Bank Of America has eight.

    Muddying the waters further, many published fees are open to negotiation, says Eric Zarnikow, director of the SBA's Capital Access Department. Keep a sizable enough balance and some fees just go away. Wells Fargo, for instance, typically charges $50 a month to maintain a money market account but waives that fee for customers who maintain $50,000 in their accounts.

    Sadly, when it comes to fees, there is no remarkably efficient way to comparison shop. Your best bet: Talk to as many people--bankers and entrepreneurs included--as possible.

    Some parting advice about working with banks: Make sure to get to know your banker before you need the dough. Lenders like doing business with people they know, so take steps to establish those relationships long before you go looking for a loan. Start by setting up an appointment with a lending officer to have a general chat about your business; you'll make a good impression and establish yourself as a potential long-term customer.

    Finally, says Siewert: Get to know at least two people at the bank (say, the credit manager and the local branch manager). It never hurts to hedge your bets--especially in a credit crunch.

    2008-08-19 13:58:30
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    hins9224 02:34:05 PM Sep 21 2008

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    What is the answer - if you have more than $100,000. in an account - what do you do about the fdic only insuring $100,000. Do you take out monies to bring the account down to less than $100,000 and where do you suggest you put the monies in excess of $100,000?

    prayerfeathers 10:54:52 AM Aug 25 2008

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    After working with major banks for many years I am now with Bank of the West.They are a perfect fit for my growing business.

    crazt 08:00:51 AM Aug 24 2008

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    banks love to charge overdrafts. they make their money on that. they post your debts before they post your depoist. that is an old trick so they can charge for overdraft when you really are not overdrawn. the best you can do is check your bank account on line daily. wacth the times on deposit slips and when debts hit the bank. they do not expect you to look at the times. makes a big difference. my bank got caught at it. i woke up on a monday and checked my account found they charged me over 600 dollars in overdrafts. i was at the bank in less then an hour. they returned my money. i had my records with times and date as well as a print out from on line. you have to stay on top of you accounts or they will rob you blind. i do not have problems with my bank very much now because i catch them before there day even starts. watch keep track of records of anything you purchase or deposit. you are your only protection. they will not protect you that is for sure. crazy as a fox in fl.

    em383rs 01:04:59 AM Aug 24 2008

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    COMMERCE BANK 4LYFE....BEST BUSINESS BANK EVER!!!!!

    illusionsbylite 10:42:31 PM Aug 23 2008

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    small business owners (account balances $300 or more) might want to check out 'First Bank'. Very personalized- NO hidden fees,charges ect.I have very pleased. Its about time that customer satisfaction takespriority! Wachovia needs to stand DOWN...and take a serious look at those fees that cripple the small guy.

    ronaldrnldmjr2 09:09:54 PM Aug 23 2008

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    all banks will cheat you ,and get away with it no matter how smart you think you are they/the bank have the right account just for you ,the ones that you think is perfect is charging you/and at the same time making money from you,how? you need to find out how lets face it they might be wrong ,but they need to make money or rist goiog out of business/if you had that choice to make what would be the answer, and you are their costomer so that make you the vistim,thats basically what they are telling you if you can read in between thier

    npayette1 06:20:19 PM Aug 23 2008

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    BANKS SUCK

    deckproco 05:52:31 PM Aug 23 2008

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    SPAMMING ON A CHAT PAGE...SHAME ON YOU

    dameonkennex 04:25:56 PM Aug 23 2008

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    THIS HAS GOT TO BE A JOKE ANY ONE WHO TRUST A UNITED STATE S BANK SHOULD SEE A SHRINK EVEN MY SIX YEAR OLD KNOW S THAT WHICH BANK S RIGHT FOR YOU MAKE S YA SICKWHY DON T THEY PRINT ALL THE C E O BONER CHECK S AND HOW MANY PEOPLE LOST THERE HOUSE S BECAUSE OF THESE THESE FEAKE S

    cgagg 03:00:55 PM Aug 23 2008

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    I have been with every bank in ny. state and am now with wamu for over 5 yrs. although they do not cater to small business out of the 25 diferent banks i have had wamu is the best! and out of the 16 banks thaty are still around the worst by far is....Bank of America!1(I personally renamed them the"Worst bank in America"

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