How to choose a bank? This is a common question amongst small business owners. A hard to answer, too. It’s not just about choosing the most convenient services and rates, and it is not as simple as choosing the largest bank.
You must find a bank that you can trust, that can connect with you and with the needs of your business, and with which you can establish a long-lasting relationship.
This article will serve as a guide for you to know how to choose a bank for your business. First, we will give you a list of the services you should compare when you start your search. Then, we will contrast the characteristics of banks according to their size.
We will also talk about the different accounts available for small businesses, and we will give you some tips on how to choose a bank. Finally, we will tell you how to open a bank account if you don’t have a Social Security number.
How to choose a bank: 5 things to compare
What do you need from a bank? A loan, a business credit card or a line of credit? Each bank offers different financial services, which makes it more difficult to find the right one.
To choose the right bank for your company you must compare different entities, their portfolios, and benefits, and discover which one meets your financial needs.
When learning how to choose a bank you should check the financial products and other benefits the bank offers before making a decision:
Each bank offers different basic products. You should focus on the ones you need, but keep in mind that as your business grows you will need other services.
Find out the details of each of the products offered by the bank, the rates, and requirements. Remember that all of these may vary, depending on the entity, so take your time to compare. At least, a bank should offer the following products:
🏦 Current account
🏦 Savings account
🏦 Checks and checkbook
🏦 Online banking services
🏦 Accounts for employees
In an era dominated by technology, and with the rapid digitization of all processes, even smaller businesses need digital solutions. Banks are aligned with this reality and offer automated products to facilitate your transactions.
It is now possible to make deposits from your smartphone, receive electronic transfers, or check the movements of your accounts from your computer. If it is vital for you to have online services, the bank you choose should provide these products, and support them with the most recent technology.
Banks charge fees for their services. Opening a business account, using your ATMs, or obtaining a statement, they all might have a cost.
Some banks even charge fines for not having a minimum balance, for making too many deposits and withdrawals, or even for not using your account frequently.
You must know what are the fees that you will be charged for the services, and if there is a way to reduce or eliminate them.
Banks are quite generous when it comes to attracting customers. Gift cards, cash bonuses for opening accounts, and discounts at certain establishments are just some of the benefits they can offer you to become a customer.
Although this should not be the main reason for choosing one bank over another, some discounts or benefits may be worthwhile, especially for small businesses.
Banks do not only safe keep your money. Loans are one of its main attractions, but you need to know if they can offer you the capital your business needs.
Will they be willing to lend you the sum you need? What are the requirements to apply for a loan? What are their interest rates? Are they open to renegotiate the terms of a loan?
These are some of the questions you should ask the representatives of the banks you interview. Something you should also ask is if they offer other products, like lines of credit, or better yet if they have an agreement with the SBA.
Finding a bank that offers loans in association with the SBA is a huge advantage. The association guarantees that the banks receive their money if you do not pay a loan, so they are more willing to approve loans. Besides, SBA loans have more convenient terms.
How to choose a bank according to their size
The size of a bank should also influence your decision. A national bank has more services to offer, but you can speak directly with representatives at a local bank.
Even credit unions and online banks are great options, too.
|Local banks||You can speak directly with representatives.
They evaluate your loan applications based on your character and your profile, and not only on your credit score.
They know the local market conditions and want to help it grow and thrive. For this reason, they are more willing to grant loans.
|They may have higher rates.
Some do not have technologies to offer online services.
|National banks||They have many branches and a wide variety of services.
They offer different loan options, and benefits when acquiring their products.
They have the lowest interest rates in the market.
They have online banking options, with multiple functions and backed by modern technologies.
|They can bee distant with their users and they might lack personalized attention.
Your chances of accessing a loan depend solely on your credit score and financial history.
|Online banks||Everything is done online: creating an account, applying for a loan, making transfers, and deposits.
Applying for a loan is faster. It is also easier for them to approve your request, and they can deposit the money in a few hours or days.
It is possible to find lower rates than with other lenders.
|There’s no human interaction. This is a disadvantage when it comes to solving problems that the system is incapable of solving.
They depend entirely on technology. A system failure, problems with the internet connection or lack of electricity can prevent you from accessing their platforms.
|Credit unions||They offer services similar to those of a bank, such as different types of loans, savings accounts and checking accounts.
They are more flexible than banks when evaluating loan applications, and you can have direct contact with their representatives.
Their rates and interest rates are very competitive.
|You must be an active member of the cooperative to access its services. Becoming a member can be difficult.
They do not have many branches, and their ATM network is very limited.
How to choose a bank: types of accounts for businesses
Have you decided what type of account you want to open when you find the right bank? You can choose between a checking or savings account.
A checking account is a vital part of the business. In this type of account, the cash flow of the company is managed, and they are used to pay bills and deduct the payroll.
New businesses can benefit a lot from this type of account. Using it properly can even influence the bank’s decision when approving a loan.
This account is, as the name suggests, to save your business’ money. They are designed for well-established companies that can afford to reserve part of their capital.
Think of a savings account as a financial cushion for your company in times of crisis, or as the source of capital to invest in its expansion.
How to choose a bank: 5 tips
Asking about their services and comparing institutions are the initial steps to find the ideal bank. But there are other things you can do to truly find the bank that fits your business.
1. Where is the bank?
You may have to go to your bank frequently to make deposits and withdrawals. If this is your case, make sure there is a branch near your office.
It is also convenient to find branches in other places when you do business trips, or at least finding ATMs.
2. Help and advice
Having specialists on hand who can advise you when you need them is another advantage you should look for. Some banks have experts to advise you on how to manage your accounts or how to apply for a loan, even for tax-related issues.
3. Talk to other business owners
Other entrepreneurs may point you in the right direction. Talk to entrepreneurs in the same industry as yourself and that operate in the same locality. Their experiences with financial institutions could help you decide.
4. Visit their offices
The best way to learn more about a bank is to visit it. You can tell a representative about your business and the services you need. They can help answer all your questions, and in passing, you can evaluate their customer service.
5. Will your money be safe?
If your home, your car, and your health are insured, your money should be too. Find a bank that has the backing of the Federal Deposit Insurance Corporation, also known as FDIC. This federal agency ensures balances up to $250,000 per depositor.
What happens if I don’t have a Social Security number?
A recurring problem amongst immigrants is the lack of a Social Security Number, which is a requirement to open a business account in some banks. If you are in this situation, an ITIN could be a lifesaver.
ITIN is an identification number that can be used by immigrants who do not meet the requirements to have a Social Security Number. Known as an Individual Taxpayer Identification Number, it is also used by this population to file taxes.
With your ITIN, some banks will allow you to open a bank account for your business. For immigrants, the bank application process varies, as they must provide additional information and documents:
- Name and place of birth
- National or foreign driver’s license
- Birth certificate
- ITIN number
Open a business account right now!
You already know how to choose a bank for your small business. Researching their services and comparing them can help you find the best match.
While searching for a bank, decide what type of account you will need, and don’t forget that asking other entrepreneurs and visiting several banks can help you decide. If you don’t have a Social Security Number, it doesn’t matter, you can open a bank account with an ITIN.
In Camino Financial we do not leave any businesses behind. If you are looking for a bank because you need financing, we invite you to apply for one of our loans. Request a quote, and let us tell you our loans will help you expand your business and improve your income.