With thousands of commercial banks to choose from, many of them conveniently located, how does a small-business owner know which one is right for his company?
Small-business experts are quick to point out that not all banks are equal. Some specialize in real estate loans, others in auto loans, and still others in commercial loans. Neither do all banks offer the same products, services or interest rates; charge the same fees for services; or have the same requirements for, say, minimum balances and loan qualification.
“It’s important for every businessowner to find a bank (and a banker) that will contribute to the success of their business,” says Ken Gaebler, founder, chairman and CEO of Gaebler Ventures, a business incubator, holding company and venture capital fund based in Chicago.
Finding the right banker is just as important for the success of the business, emphasizes Don Green, an adjunct professor of marketing and management at St. Johns University and an instructor for The Network Journal/National Minority Business Council Inc.’s Entrepreneurship Boot Camp. “It’s the relationship you build with your personal banker that determines how effective the long-term banking relationship will be,” he says. “Interview as many bankers as possible until you find one you are comfortable with.”
Too often, businessowners fail to thoroughly evaluate the needs of their business when choosing a bank, experts say. Those needs go well beyond obtaining a credit card and establishing a basic checking account for payments and deposits. This is where the business-owner’s relationship with a banker can be critical. According to Gaebler Ventures, the banker can provide special loan programs for small businesses, including U.S. Small Business Administration loan programs and other government-guaranteed or agency loans; give advice on what it will take to qualify for the loan that best meets the needs of the business; help with the cash management needs of your business; and offer investment products, such as overnight to long-term certificates of deposit, and products of varying risks, from treasury securities and insured deposits to other stocks and mutual funds. The banker can even assist with finding financial information on your industry.
Green advises: “Be sure to start the relationship with a banker well before you need a loan or line of credit. Bankers like to do business with people they know.”
Here are Gaebler’s Top 10 tips for finding a good bank:
• Approach the decision as a long-term investment.
• Ask your accountant or lawyer to introduce you to bankers that they are familiar with.
• Check with your local chamber of commerce to find out what banks are active in the community. Attend their meetings or those of other service organizations to meet bankers who are involved and have interests similar to your own.
• Look for a complementary personality, someone you can relate to.
• Introduce yourself to the banking center manager.
• If you are looking for a loan, ask to meet the loan officer who will be assigned to you.
• Find out how long the manager and loan officer have been in their current positions (bank managers and officers change locations and get promoted).
• Tell them about your business and the form of organization so they can tell you what special products and services or restrictions might apply.
• Compare interest rates on deposit accounts and basic consumer loans (most business loans are negotiated, so the rates won’t be posted at the banking center).
• Look carefully at the charges for services if your commercial deposit account will be billed on analysis.
“The bottom line is, a businessowner needs a bank and a banker who will eliminate some of the headaches of running a business without charging an arm and a leg for doing so. Shop around, shop around, shop around,” Green says.