Tips For Choosing The Right Bank For Your Small Business
Choosing a bank for your small business is not as simple as you may think. It is not just going into your personal bank and opening a second account. It requires a lot of planning. Also, your business needs are different from your personal banking needs, so do not rush to choose just any bank. This may seem like a small step but actually, it is an important one for your financial and business success.
If you are starting a new business, then it is essential to think not only for the present but long term. You need to consider how your bank will support your business as it grows.
Here are some tips that will help you with the right choice for your small business bank account:
Define your business goals and banking needs
These two points things are the most important. You need to define your goals before you start searching for a bank. Know your short and long-term goals, and then set your banking needs on those goals.
When talking about goals, we don’t mean only financial ones. We mean on questioning yourself, what are your plans for your business? How do you plan to grow, now and in the future? That is why you need a scalable bank. You don’t want your business to outgrow your bank and not be able to upgrade on a higher account.
You need to think years ahead. And you need to consider the fact that one day you may need a business loan. So here is where your personal bank may not be the right choice. It may not be small business-friendly, it may not offer the best rates or it may have high rates for loans.
So, that is why first you need to understand what kind of services your business will require, and then start your search for banks that are offering the best criteria that suits your needs.
How to find a bank?
Where should you look for the best bank for your business? Our tip is to start local. If you have built a relationship with some bank, it may turn useful with time. If they have worked with you before, then they do not consider you as new. This is important, especially for small business lending.
You need to consider the different kinds of banks in your local environment. Most of the time, we choose to go with the big banks. If you are looking to secure loans for your business, consider the smaller regional or microfinance banks. Do extensive research on the banks on how the banks operate and the kind of financing services offered. Ensure that the bank’s service offerings align with your goals.
When searching for the right bank you need to consider the ones that can work with existing technology services and that can integrate with the software you are planning to use in the future. It can be such a waste of time to manually enter all of your transactions for the week, so that is why your bank needs to be able to integrate with your accounting software.
Small or big bank?
A lot of banks are offering very similar services so maybe it is useful to consider the bigger picture. First, check the reputation of the bank and research their approach with growing businesses. You must define if the big bank is the thing you are looking for. If not, then there are other choices as well.
There are some advantages and disadvantages to working with smaller banks. The disadvantage is that the big banks have more options and access to more funds. On the other hand, smaller banks are catering more towards local business clients. So why be a small fish, when you can be the biggest banking customer here.
Find experience in your industry
It is worth mentioning that some banks are specialized or have experience in a specific industry. If they are familiar with yours, they will understand the needs and offer advice in that field.
Also, consult with other entrepreneurs running a similar business like yours for their bank choice and experience. Then you can go to that bank and talk in person so that you understand their way of working and thinking.
Consider online needs
If you are based somewhere locally then it is understandable if you want to have a physical bank somewhere near. However, you should consider the ATM locations and fees if you are planning to have a current account.
Most banks in Nigeria have mobile apps that work seamlessly, but some of the online versions may be slow especially the end of month transactions on banks platforms. If you are into a lot of transactional activities, where the timing of payments is a top priority, look into the right bank that offers the best app that works very well.
How do you make your payments?
If you are accepting payments from your customers, they may as well go through your small business bank. Think about the way you make your payments (debit card, cash, deposit, etc.) and how is that affecting your banking needs.
Another thing for considering is the maximum or minimum withdrawal and deposit amounts since some banks have restrictions. If your bank allows only 100 transactions without a fee and you are making double then it is not a good fit for you.
We already mentioned this earlier, since it is really important. If you think that at some point you will need a business loan, then you should consider a bank that also gives loans. That is why you should know the loan requirements of the banks and if they are not suitable, then look for other options.
If you want to know more about how to prepare for an SME loan, read our article here.
When you start narrowing your list of banks then it is time to do a rate comparison. Some banks have some unexpected fees, so here are some service fees that may be charged:
- ATM fees
- Account fees
- Management fees
- Withdrawal/deposit fees
- Inactive account fees
- Card service fee
- SMS and Email fees
- Overage fees
Perks and incentives
Some banks offer some bonuses or incentives if you register and use their services. However, this is tricky, be careful since you may end up paying it elsewhere.
Don’t think about what you will get from the present situation only, think of what will happen after you will open your account.
Consider the following as well:
- Payroll: This is important if you are considering hiring employees
- Customer support: if you are operating outside of normal business hours,, you need a bank that can provide support at no extra cost to you.
- Account officer: what kind of account specialists are available at the bank to support a business account holder like you.
So, to sum things up, it is important to choose the right bank for your small business. This is a long process that needs to be done correctly since you don’t want to go through the same things again. By making the right choice, you can start building your credit profile and prepare for growth.
When talking about money and growth, some tools can be really helpful.
We are proudly sharing dillali.com – Track your income & expenses -our financial app that has helped a lot of entrepreneurs gain total control of their money.
With dillali you can track your income and expenses. Register here and see what you have been missing! And it is free!
We are looking forward to all of the feedback, you know where to reach us 😉
Stay in good health and see you next week!