10 points to be considered by Start-ups while selecting their best banking partners
As you start your new venture, selecting your bank has to be one of the most important task. And most of times I have observed that, entrepreneurs do not give much thoughts while selecting their bank. Some of the interesting answers that I got while I enquired this with them:
“I selected it because my dad has a bank account with this bank”
“They called me up & I just opened my account”
“I liked their TV promotion” and
One even responded “It is just because my girl friend asked me to do it as she works there & it helped her achieving her monthly sales target”
So, next time you start scouting bank for your start-up, try to set-up a formal interview meeting with bank representative and prepare to ask some of these questions, which may help you to shortlist a bank that best meets your needs.
- Size Matters, How big is the branch & what is the average size of their customers. If the branch is too small or too big to your business needs, it will hamper your transactions & your business may not get desired attention.
- Capabilities/ facilities available, for eg. Do they handle international banking? If your business has foreign transactions with international customers or suppliers, then this will be very important for your business. Are you looking for specialized services, such as investment help or a small business loan? You can search online for local banks that specialize in equipment loans or small business working capital.
- Online services, In today’s hyper-competitive environment, visiting bank during daylight hours is time consuming for many busy entrepreneurs. Internet is having a huge impact on small businesses. Look for online cash-management (which eases the sending of invoices, collection of payments and cutting of payroll checks) and loan-application services which are usually offered free for small-business depositors.
- Support to start-ups, considering a big movement in start eco system some of the banks I know, have initiated programs for start-ups to provide them all necessary support to start their business. This support system include services like, suggesting verified vendor partners, door services, financial & regulatory information, information on various government schemes available for their ventures etc. Check with your potential banker what they are doing specifically to support start-up entrepreneurs.
- Bank Charges, What are their charges for various transactions? Banks normally have standard bank charge tariffs to cater to different level of customers. So compare & negotiate their charges suiting your banking needs.
- Minimum balance requirement, Some business bank accounts offer monthly fee waivers if the account balance stays above a certain minimum average balance. Try to negotiate a best deal with maximum waiver at minimum balance requirement and ensure that you would be able to comfortably maintain minimum balance to avoid unnecessary fee.
- Proximity, Decide whether you would prefer to conduct your business banking in person at the branch, or online, or a combination of the two. If the answer is at a branch, choose a bank that has a local branch near you – and if you think your business is likely to expand in multi locations, choose the one which has multiple branches.
- Credit Lending, If your business may need a loan in future, limit your banking options to banks with a history of lending to small businesses in your industry. Ask questions like, Does your local banker have lending authority? What’s the largest loan he or she can approve without checking with higher ups? Relationship managers at community-based banks often have more discretion than those of a big institution and they may consider small-business lending to be their bread and butter.
- Extra Benefits: What extra benefits are available with your account? Despite stiffer lending procedures, larger banks may offer added benefits such as online services which may help save your time and money on tax or accounting assistance. These may include sending invoices, collecting payments, payroll and loan applications. Some banks may be willing to extend added benefits to your employees on their savings or deposit accounts or provide better deals on their home or vehicle loans.
- Connections/networking– It’s hard to compare this to the larger banks, but most of the banks now organize a bunch of networking events. Networking is important and being with a bank that is interested in helping you out with it, at no cost, is fantastic.
Your Bank is not just to process your paperwork — they are skillful allies who help you to grow your business. Especially if your services or products are targeted at specific industry, your knowledgeable, local banker can point you in the direction of valuable resources. So, put as much efforts in finding the right bank—and nurturing your relationship with your banker—as you would put into landing a big customer or hiring a new member of your management team.
Amit Bhuttan is a Lead CFO of CFO Ladder LLP, a business consulting firm that helps early-stage, small and middle-market businesses grow through design and execution of sound business strategies.