Where’s my money at?

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As I mentioned awhile ago in my post about startup algorithms, we’ve been spending a fair amount of time looking for a good business bank.
On the surface of it, most banks will offer pretty identical services: business checking, money-market checking, business credit cards, safe deposit boxes, various types of business loans, etc. But I think it’s important to invest some time into finding the right bank because our relationship with the bank will be substantially different than the one I have with my personal bank. All I ever wanted out of my personal bank was free checking, a decent credit card, conveniently located ATMs and minimum hassle. With a business bank, I want similar stuff (checking, credit cards, etc) but I also want a much more personal relationship.
If you know and trust him or her, a good banker can be a great business resource. He or she can give you financial advice, suggest resources, help you network and even connect you with potential customers. Additionally, a banker who knows you is more likely to approve loans based on your qualities and characters.
To me, it seems like it’s easier to create this relationship with a smaller, local bank. They tend to be more involved in the community and have a smaller client pool, so your business is even more important to them. Also, generally speaking, smaller banks give more loans to small businesses than big banks. This is probably due to the fact that a rep at a small local bank has more ability to grant loans based on the character of the business owners than someone who has to justify each loan to headquarters using only hard numbers.
On the other hand, if you know that you’ll be moving your business soon or will have offices in a lot of states, it might make more sense to choose a big, national bank.
Once you know what you want from a bank, you can start searching for candidates. Obviously, if you can get recommendations from other business owners (particularly ones in businesses like yours), that’s great. We got a few personal recommendations, but we also checked Entrepreneur.com’s Best Banks for Entrepreneurs and a list of the SBA’s top small-business friendly banks (I found this info in Appendix C of Start Your Own Business but unfortunately I can’t find the same list online).
Once you’ve got a good list of banks, you should either call them or set up appointments to find out more. It’s tempting to just call the banks, since it will be significatly quicker, but I strongly recommend going to see the bank fo r yourself.
The reason is that most of the banks you are looking at will likely have very similar offerings. So just getting the numbers is probably not going to give you enough data to make a good decision. Actually visiting a bank will give you something much more valuable: an excellent feel for how you would be treated as a customer.
I visited four different banks and the differences were striking. Some reps were happy to make an appointment with me, others would not. Some were well prepared for my questions, others seemed totally unprepared. Some seemed rather annoyed while answering my questions, others seemed really enthusiastic. Some just handed me brochures, others took the time to explain everything to me. On paper, they all offered comparable business accounts. But after visiting, one was clearly more interested in helping our business succeed. It’s hard to build a personal relationship if you dread going into the bank, so invest some time to find a good fit.
That said, you do need to look into the details of the accounts and services offered by each bank. Here’s how I would approach each meeting.
1. Start by introducing yourself and explaining your business (product or service, location, number of employees). If they are interested and ask good questions, that’s a plus. If they are disinterested and rush you, that’s a bad sign.
2. Most banks offer free business checking as well as money-market checking. Ask for their info on these plans. In particular, you want to know about setup fees, monthly charges, minimum balances, and the number of transactions you can have per month.
3. Does the bank offer a business credit card? If so, get the brochure on how to apply, what rewards are offered, and the interest rates.
4. Does the bank offer safety deposit boxes? If so, how much do they cost? And where are they located? Many banks only have them at some branches, so you want to makes sure you don’t have to drive an hour to get there.
5. Is there anything you can’t do online? Is online banking free? Can you set up automatic bill pay?
6. What are some recent interest rates for line-of-credit loans? This will probably be the first type of loan you get from your bank.
7. Does the bank have an individual or even a whole group that works specifically with small businesses?
8. Can you easily continue banking if you need to move somewhere that does not have any branches? Do they have many customers who bank from out of state? Usually you can bank online or by mail.
9. Ask for references. The best way to do this is to give the rep your contact info and ask them to pass it on to another small business (preferably in a similar business to yours) that would be able to recommend the bank. If the bank won’t do this or you never get a call, that’s not a good sign.
I really put a lot of weight in references. A good reference can tell you a lot: that the bank is good enough to warrant praise from it’s customers, that it serves businesses like yours, and that it knows its customers well enough to quickly find a such a customer.
If another business does contact you to recommend the bank, I would ask them
– What does their business do?
– How long have they been in business?
– How long have they been with the bank?
– Did they switch to the bank, or have they been there all along?
– How did the bank help their business? Ask for specific instances.
– What are the aspects of the bank they think could be improved?
Is there anything else you would ask a bank? Any other factors that should be used to decide? Any success or horror stories when it comes to finding a bank?

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One Response to “Where’s my money at?”

  1. Jesse Says:

    Do they have suckers in the lobby. Not a good sign if they don’t.
    In all seriousness, it sounds like you’re on pace so far. I think the real trick will be aligning with the right bank when/if you grow to a much larger size. A smaller, more personal bank may be very helpful as you get started, but if you begin raising capital via VCs, you may be looking at larger institutions to underwrite. So you may, depending on growth, have to look at making a switch later in your career.
    I would suggest you determine what accounting software you would like to use, and make sure the bank is set up to easily import and export with that particular app. The online banking interface is probably the #1 reason I like my bank – it’s easy to manage payments, multiple accounts, and exports to my tax software. On top of that, the fees were the lowest (at the time) for both personal and small business banking. To top it off, since they’re a smaller/medium sized bank, aggressively trying to grow in Colorado, they have been very lenient about reversing fees (stupid NSF). But I have found the ease of online banking to be their biggest credit.

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