Choosing a bank for your business is an important financial decision that requires careful consideration. While you may get recommendations from investors, business partners, friends, or family members, in most cases, it's essential to do your own research as well.
Once your business is up and running, changing the bank (or credit union) you use can be a time-consuming and costly process, so it's better to do your homework in advance and pick one that best suits your business banking needs. If you're looking to change banks, it's even more important to ensure you're getting a better banking experience so that you don't have to go through the experience again in another 6-12 months.
A bank's reputation in the industry is an important factor to consider. You can check the internet for reviews and feedback from other customers to see if the bank is reliable, trustworthy, and has a good track record of customer satisfaction. You can also check if the bank has faced any legal or regulatory issues in the past.
Even if you plan to use something other than a brick-and-mortar location, your bank's customer service should be excellent and it should be easy to get help from a person. Be sure to consider the quality of assistance you can receive from your bank and the ways you can contact them, including phone, email, and live chat. Even though many problems can be resolved online, being able to get customer support quickly and reliably is essential.
While almost every financial institution now has a digital presence, websites and mobile apps are not created equal. You want an online banking experience that is robust and easy to use. Be sure to explore a bank's website and read customer reviews of their app in both the Apple App Store and Google Play Store before you decide to open an account.
If you're already set up with accounting software such as Quickbooks or Netsuite, you can check to see if a prospective bank is on the list of institutions the software has a native integration with. Connecting directly into your bank account from your ERP will make the accounting process quicker and easier.
While business bank account fees are generally small these days, it's important to know your costs for services like payment processing and wire transfers in advance. Some banks also limit transactions and cash deposits before charging a fee.
Many banks also charge service fees for business checking accounts, though often these are waived if you meet specific criteria such as maintaining a minimum balance.
While most individuals will never exceed the $250,000 FDIC insurance limit, this is not necessarily the case for businesses – especially if your business is a venture-funded startup raising significant funds.
Typically, the only way to increase how much of your money is insured is to open additional bank accounts. Since this is impractical, the Insured Cash Sweep service was created to provide the same benefit of distributing your money across multiple banks without having to open various accounts. With this service, your bank automatically sends funds in excess of $250,000 to other network banks.
A list of participating banks can be found HERE.
As a business owner, one of the most critical financial needs you might have is taking out a loan. Therefore, evaluating a bank's loan facilities is crucial. Check for loan interest rates, the maximum amount you can borrow, and the repayment terms. Some banks require a personal guarantee, which puts your personal credit at risk if you run into repayment difficulties.
It is best to look for a bank offering flexible loan options that align with your business plans.
Though savings account yields sat near zero for many years, these have increased along with interest rates in recent months. As of April 2023, some are offering APYs close to 4%. If you're considering a business savings account and a business checking account, pick a bank offering more than 0% APY.
It may even make sense to open your savings account at a different institution that offers high-yield savings accounts, which are more common with online banks. While accessing these funds may take slightly more time, the interest you earn will help your bottom line.
Many banks offer an incentive to open a business bank account with them, such as a cash bonus for depositing a certain amount. Some also offer incentives for opening a personal bank account as well as a business account that you may find beneficial.
When you're opening a business checking account, many banks will try to get you to open a business credit card with them. Unfortunately, even the best traditional banks only offer a few of the additional card and spend management tools modern businesses require, which can result in extra cost, effort, and accounting staff a smaller business may need more resources to support. Download our ebook, "Beyond the Gold Cards: Beyond the Gold Cards: Why Companies Are Moving Away from Traditional Banks for Corporate Credit" to learn more about why more and more businesses are choosing providers like Torpago that offer advanced spend management platforms along with physical and virtual business credit cards.