For your business, the bank is more than just a place to keep your money. Ideally, the bank is your partner; a reliable source for a variety of lending and cash management services, and a member of your management team that can help plan the future of your enterprise. A good bank can be an invaluable resource, so it's important to do your research and pick the bank that's right for you and your business.
As a small-to-medium size business, your bank choice is extremely important, especially when looking to take out a loan. Though small business loans were a challenge to get just a few years ago, the Birmingham Business Journal reports that “small business loan approval rates at big banks are up 15.9 percent over the past year, according to a monthly analysis by Biz2Credit.com.”
Your banking partner, however, is still in its own business of making money by providing its services to you. The cost of these services may not always be immediately apparent.
Here are five things to look out for that can help you cut the costs of business banking.
1. Read the Fine Print
Read the fine print. This is the guiding principle that applies to everything else recommended below. Banks are required to disclose their fees, but these are sometimes buried in the fine print. Unless you actually like to read legalese, talk to bank representatives and ask them to explain any and all fees that could be incurred, and how they can best be avoided or waived.
2. When Is Free Business Checking No Longer Free?
Like personal checking, monthly account maintenance fees are waived if you maintain a minimum balance or have a credit card or another type of account with the bank. Frequently, signing up for direct deposit, paperless statements, or other banking services that save you and the bank time and money can result in waiving many standard account fees.
It almost goes without saying that a free account is better than one you have to pay for. But, keep in mind that free accounts aren't necessarily always free. If maintaining the minimum balance is unrealistic, maybe a low-fee account is better than one that socks you with a high penalty every month you fall below the minimum.
Also, even free business checking assesses fees for excess transactions and cash handling. If your business is likely to have a lot of monthly transactions or cash deposits, find a free account with high thresholds. Otherwise you may find yourself paying more for the account than you should.
Related Article: Can You Really Get a Free Business Checking Account?
3. There's More to Business Banking Than Banks
Your inclination may be to just work with the bank where you do your personal banking. While perhaps convenient, it's not always the best choice. Some banks specialize in small businesses and are more likely to extend credit and offer more favorable rates.
Also, while credit unions offer fewer product lines and generally are more focused on personal accounts, they do have the reputation of being more community-focused, and thus more amenable to helping a local small business grow. In many cases, credit unions have fewer and lower account fees. Another alternative is internet-based banks, like Bank of Internet USA, which frequently offer more straightforward terms and lower maintenance fees than a traditional bank.
Download a Whitepaper on Internet Banking for Business
4. Look for Government-Guaranteed Loans
Ask your bank about the Small Business Administration (SBA) microloan program, which backs a certain portion of a loan up to $50,000 and provides favorable financing terms. If your lender isn't a qualified to participate in the program, ask for a referral.
5. Find the Right Bank
It pays to shop around. In general, community banks do more small- business lending than big national banks and may offer more favorable terms. Also, an SBA-affiliated bank may offer better terms. Remember, just like you, banks are in business -- make them compete for yours.