How to Choose the Right Bank for Your Business
As a business owner, every decision you make affects the bottom line. The start of the new year is a good time to review your company’s business plan, set revenue and cost-saving goals, and take stock of market trends. It’s also a good time to examine your company’s banking relationship to ensure it is a good fit with your needs.
The relationship you form with your banker is one of the most important business relationships you can have. It plays a key role in helping you obtain financing, manage cash flow, and achieve your goals. It should help your business grow, rather than be another task you have to manage. And while it’s important to have a firm understanding of a bank’s operations and systems, the process should begin with the relationship itself.
Business executives want a thorough understanding of bank fees and services, but in my experience what they REALLY want to know is: Am I going to be able to get in touch with you and how? Do I get your phone number, an email, or will I have to wade through a list of people just to get a message through?”
I recently met with a local entrepreneur, and in the course of our conversation, he wanted to know what kind of relationship he could expect to have with PlainsCapital. Would it be hands-off or collaborative? Would he work with an individual, a team, or an automated computer system? These are important questions to ask … and have answered.
With these factors in mind, following is a short list of questions to go over with your banker. These four essential questions can help open the dialogue to identify how in sync you are regarding your needs and growing your business.
What will our relationship be like if I bank here?
As the entrepreneur’s points demonstrate, it’s essential to have an advocate at your bank. You want a banker specifically assigned to your account who is charged with managing and growing the relationship. Clarify how they’ll handle your business. Will you meet regularly at the bank or at your office? Nail down expectations for how easy it will be to get in touch when needed and the typical response time.
Your banker is the person to guide you through the depository and lending process and assist with your treasury management and potential private banking needs. They can let you know about important new products and give you news about the bank before you hear about it through social media or other channels.
The relationship should also extend beyond the bank, helping you broaden your connections with the local business community.
Finally, don’t just take the bank’s answer to these questions for granted. Utilize your professional network and inquire about the relationships they have with their banks.
What is your lending process for businesses like mine?
Before you apply for a loan or a line of credit, you want to know in advance that the process is simple and straightforward. If it’s not—if a bank starts obfuscating before you even submit an application—that could be a sign that you should probably move on. Some things to determine before you get started include:
- Does your company qualify for the loans the bank offers? Is the bank also a Small Business Administration (SBA) lender?
- What is the lending process? What financial records and tax records are required? Will there be interviews? Is the decision made locally?
- What is the timeline? How long does the approval process take after you apply?
Most importantly, find out whether you will have an opportunity to sit down with bank representatives ahead of time. This is yet another chance to build a relationship and pick up advocates who can guide you through the lending process.
What is the financial strength of the bank?
Do a little homework. Before approaching any financial institution, make sure they are FDIC insured. Additionally, look at the bank’s ratio of non-current loans to total loans, deposit growth, available cash, and its record with the FDIC. You want to get a feel for the overall health of the bank—that it’s strong, well-capitalized and has a diverse loan portfolio.
What are the banking services I need right now, and what will I need in the future?
Have a list of what services you think you need, like online and mobile access, fraud protection, wire transfer, automated clearing house (ACH), lockbox, or a line of credit. If you’re not sure what you need, then just be ready to discuss your business. A good banking relationship manager should be able to connect you with the right services for you.
As for what you’ll need in the future, your banker should be able to make some predictions, but the answer mainly depends on how your business evolves. The important thing here is to build a relationship. You want a banker who’ll let you know what you need to add—and what you can drop—as your business grows. They’ll also alert you to new services the bank is offering.
Finally, keep an eye on this during the vetting process: if the bank asks you what services you’re currently paying for and, critically, whether you’re using them, that’s a good sign. This is our chance to save you money. If the bank you’re assessing is smart, they’ll want to do just that.
There are many types of professional relationships, but none more important—or potentially business altering—as your relationship with your banker. Having the right banker and the right bank can be one of the best business decisions you make, so don’t make it lightly.
To learn more about PlainsCapital’s business banking culture and services, visit the PlainsCapital Bank website.