How to Choose a Bank as a Small Business Owner | Banking Advice
Key Takeaways
- Identify your business’s unique needs before you start looking for a bank.
- Some banks offer product packages to small-business owners.
- Where you do your personal banking could be a good option for your small business.
Choosing a bank might be one of the most important decisions a small business owner can make. After all, a small business needs a safe, reliable place to keep its money and carry out other financial functions.
Small businesses “should bank with someone who saves them time, makes it easier to run their business successfully, and gives them great savings and value,” says Kyle Cooper, vice president and general manager of checking and payments at Bluevine, which operates a banking platform for small businesses.
“Small business success begins with a strong banking partner,” Cooper adds. “Small businesses should take their time selecting their bank to ensure it’s a partnership that will lead them to continued success.”
What Type of Bank Is Best for Small Businesses?
Picking the right bank depends on each business’s unique needs. How can you determine which type of bank to choose for your small business? Here are some things to consider:
- What products and services does the bank offer? For instance, does the bank offer products like credit cards or business loans?
- Does the bank operate nearby branches where you can get in-person help?
- How robust is the bank’s ATM network?
- Does the bank enable you to easily pay bills and move money around online and via mobile app?
- What kind of fees does the bank charge?
- What is the bank’s reputation regarding customer service? High-quality customer support is a “key attribute” for small business banking customers, says Cooper.
- How attractive are the annual percentage yields for savings and checking accounts? Because they operate as nonprofits, credit unions might offer higher APYs than banks do.
- Are deposits insured by the Federal Deposit Insurance Corp. or the National Credit Union Administration?
- Would you rather do business with a big bank or small bank? Some experts say small banks provide more personalized service than their larger competitors.
“While large banks are great at serving large multinational companies, they are not a good fit for most small businesses,” says Gates Little, president and CEO of The Southern Bank Company.
Little says it’s important for small business owners to find a bank where they can have a relationship not only with a customer service representative but with members of the management team as well.
“Most community banks offer more personal service than large banks, meaning the customer has a dedicated officer or team of a few people who work with them daily or as often as needed,” Little says. “These relationships often last over decades, as the personnel at community banks rarely change.”
Let’s look at some of the key differences across community banks, regional banks, national banks, credit unions and online banks.
| Type of bank | Size in terms of total assets | Typical products and services | Key characteristics |
| Community bank | Less than $10 billion | Checking accounts, savings accounts, credit cards, online banking, mobile banking, loans, branches, ATMs | Personalized service built on relationships with bankers; focus on small businesses |
| Regional bank | $10 billion to $100 billion | Checking accounts, savings accounts, credit cards, online banking, mobile banking, loans, branches, ATMs | Presence in one state or group of states; personalized service; better rates than some larger competitors |
| National bank | More than $100 billion | Checking accounts, savings accounts, credit cards, online banking, mobile banking, loans, branches, ATMs | Nationwide presence, including branches and ATMs; broad array of services |
| Credit union | Varies | Checking accounts, savings accounts, credit cards, online banking, mobile banking, loans, branches, ATMs | Nonprofit; often higher APYs and lower fees |
| Online bank | Varies | Checking accounts, savings accounts, online banking, mobile banking | Often higher APYs, lower interest rates, and low or no fees; typically no branches; potentially limited access to ATMs; may not offer loans |
What Bank Accounts Does a Small Business Need?
Not every small business needs the same types of bank accounts. Typical business accounts include:
- Business checking account. A checking account serves as the foundation for day-to-day business operations. The Small Business Administration recommends opening a checking account as soon as your business starts spending or accepting money.
- Business savings account. In addition to earning interest on extra funds, a savings account helps a small business build a financial cushion for emergencies, unexpected costs or growth opportunities.
- Money market account. Unlike a traditional savings account, a money market account comes with the ability to write checks while typically earning a higher APY. However, a money market account might require a minimum balance to avoid fees.
- Credit card account. A credit card can help a small business make large purchases and establish a business credit history, the SBA says.
- Merchant services account. This type of account lets a small business accept credit and debit card transactions.
Which Business-Specific Services Should You Look for?
When deciding where to bank, pay close attention to the business-oriented products and services that a financial institution provides.
John Cliff is a senior product manager at Alkami Technology, a company making digital products for regional banks and credit unions. He says small businesses should look for banking packages that offer several ways to send and receive funds, such as direct deposits, remote deposits and online bill payments.
Mandy Lopez, former senior product manager at Alkami, adds that small businesses should ensure their financial institution allows customers to set limits on business transactions, and easily analyze cash flow and business performance.
Furthermore, Lopez says, the bank should provide ways to transact business via mobile device, desktop computer, laptop computer and tablet. “As a small business owner, you’re juggling a lot, so the easier it is to manage your finances on the go, the better,” says Kuma Gassoul, co-founder of Prosper, a financial platform for businesses.
Cooper stresses that small businesses should take a big-picture view by seeking a bank that offers competitive interest rates and repayments for business loans. A small business “should be able to easily draw funds when they need to cover big expenses, improve cash flow or take advantage of growth opportunities that may come their way,” he says.
Is It More Important to Have a Good APY or a Good Relationship With Your Banker?
A small business should consider more than APYs and fees when selecting a bank, Gassoul advises.
“Focus on the relationship you can build with your banker. Look for a bank that understands the needs of small businesses and offers support beyond basic checking accounts, such as business credit lines or financial planning resources tailored to your growth,” says Gassoul.
When you’re shopping for a bank, don’t overlook the bank where you already have personal accounts, Gassoul says.
“(That) bank already knows your financial history as a customer, which can make it easier to extend services and deepen the relationship as your business grows,” Gassoul says. “A bank that supports your growth journey is invaluable, and having a track record with them can work in your favor when you need funding.”
