Considerations when choosing a bank
Almost all of us utilize a bank’s business every day. Of the many factors that play into the choice of which bank to use, the following are a few to consider:
- Location
- Lending staff – accessibility and knowledge of your business
- Ancillary services – wealth management, IT and Deposit Fraud Protection
- Continuity of staffing
Each of these factors is important, as they blend into the total service package to maximize efficiency and safety as well as minimize hassle.
Ownership
Recent mergers have left an impact on the bank selection process. Locally owned banks are typically quicker decision-makers and have less turn over in their staffing. Larger area banks have cut back on their presence, and their decision making is often not done locally, which delays the process.
Larger banks can be a good choice if a business has several out-of-state or out-of-country locations. The bank may have similar business customers, giving them extra business insight that might help the customer.
My experience indicates that having a close relationship with your banker in the long run leads to an efficient way of doing that part of your business. The business person needs to understand that banks are heavily regulated by the government and endure endless paperwork that complicates the relationship. A good banking relationship eases the hassle of the paperwork, especially when the banker and the business person are in constant communication.
It is imperative that both parties understand the needs of the business and the ability of the bank to meet its needs. For example, many business owners rent a facility from an entity owned by themselves. The value of real estate being rented is only as good as the business that rents it. Clear documentation, including leases, in conjunction with succession planning provides business confidence to the bank. Sharing these documents and your future plans strengthens the bank’s confidence in lending money.
Cash flow
In our world of accounting, we have come to realize the ever-growing importance of cash flow. Businesses that have a futuristic cash flow model will help determine the future lending needs. We have seen clients whose capital expenditure budget was poorly done and when business slowed, their checkbook was incapable of making loan payments.
Summary
In summary, picking your bank does require some thought. In the best of times, banking relationships are typically good everywhere. In challenging times, a strong banking relationship will carry the day. If your relationship is not mutually rewarding, it is in your best interest to shop around. Many of the local banks, in my experience, provide excellent business insight to help make the relationship mutually beneficial. This solid, mutual and beneficial relationship is significant when a business requires substantial financing.
