EDITOR’S NOTE: This article is part of motherbility’s Start-Up Kit for Start-Up Businesses. Note: This article addresses business checking and savings accounts. Motherbility will discuss the business-loan process in a later article.
Picking the wrong bank can cost you time and money.
You don’t want to waste either.
Fees, services, locations — all vary significantly from one financial institution to the next.
How do you find the bank or credit union that is the best fit for you and your business?
Bankers will be happy to help you, but you’ll have a more fruitful conversation if you know what to ask.
The questions below give you a framework for that discussion. (For more on why you should separate your business and personal accounts — hint, lawsuits — read this.)
To prepare for your interviews with the bankers, think, in depth, about how your business functions. How many transactions do you process a month? Do you handle a lot of cash, or are your expenses and revenue processed electronically? What is your daily schedule? How often do you need to get to a bank? Do you need your personal and business banking to be handled by the same institution?
Those are things your banker will ask you to ensure you get the best service for your business.
Does the bank or credit union work with small businesses? Not all financial institutions routinely work with small-business accounts. When I contacted one Wisconsin credit union, for instance, I was told straight up that they don’t offer many services for small businesses. Good to know. You can find one that does.
How easy is it to set up a checking or savings account in your business’ name? What information do you need to give them? Does your personal banking history affect their willingness to authorize a business account? Do you need a business plan, your company’s financial history, etc.?
Do they require an EIN to open a business account? If you want an account in your business’ name — instead of opening up a personal account that you only use for your business — some banks require an Employer Identification Number, aka a federal tax identification number. Other banks allow you to use your Social Security Number. (How to get an EIN and why to do it.)
Do their business checking accounts have a minimum-balance requirement? Business accounts sometimes may require a minimum balance. That can be great protection against overdrafts. But do you have $200, $250 or $500 to set aside?
What fees do they charge? Some banks offer no-fee checking for businesses, while others charge a monthly fee. Additional services can come with fees, too. It’s not the only factor to consider, but a $5.99 monthly charge adds up to $71.88 a year. So it’s definitely something to consider.
Where is the bank or credit union physically located? This may not matter much to you. If you can do most of your banking electronically, and want to, then where your physical bank is located may be unimportant. But if, for example, you’re a cash business and anticipate needing to make frequent physical deposits, or exchange large bills for smaller change, then how long it will take you to get to the bank and back is significant.
Do the bank’s hours fit your schedule? Are you able to get to a bank between the hours of 9 a.m. and 5 p.m.? Or do you need a place that’s open late one night a week or on the weekends? If you can’t, are you OK with using a night-deposit system?
What automated and online services can they offer your business? Many of these services, such as electronic check deposit, are becoming standard. But ask so you’ll know what’s available and whether you’ll be charged for the service.
How can the bank help protect the company from cyber crimes? This was a suggestion from River Valley Bank’s Evan Wing, who gave an example of one service:
“You want to say, ‘I want to set up a couple of companies on autopay. … You let me know, ‘Evan, the only three companies that are allowed to take money out are my payroll company, this vendor that I have to pay monthly and then Charter for my business internet. Anybody else that tries to take money out of that account, I want you to reject it’.”
How accessible will your banker be? This suggestion came from Allison Feldbruegge of Waunakee Community Bank, who said, “You really want to know your banker and (have them) know you.” Will you have your banker’s direct line? Will a toll-free customer service line meet your needs? Will your banker come to you, or will you need to meet them in their office? How important is that relationship to you?
How long has the banking team been together? If employee turnover is significant, that can affect how well the bankers know you, their services and each other. A banker who knows you, your business and his or her colleagues’ expertise, is better primed to offer you the best products and services to match your business’s changing needs.
(Thanks to Evan Wing at River Valley Bank and Allison Feldbruegge from Waunakee Community Bank for their extensive guidance on this topic.)