In addition to a number of other valuable business lessons, working in a small business for a number of years taught me the value of having access to money and being able to process transactions with relative ease. Any small business is difficult to float if you try to do it without a loan, but small business loans can be difficult to secure at any stage in business.
Financing a small business
Before you start making any decisions, remember that all banks are different. Just because you do your personal banking with one, doesn’t mean you should use them for your business banking as well. Different banking institutions will have slightly different target markets and undertake their economic research accordingly. For example, some of the best savings rates are offered by banks that are online and have no physical shop front. This is great for your personal finances, but securing a business loan often requires developing a relationship with your bank and getting them to understand your business so they are comfortable with loaning you money.
What banking features do you need?
Fortunately the rise of online banks has increased the level of competition and as a result the number of banking features now available are extensive. Ultimately though there are only a small number of features that your business may require. Perhaps you need to write checks, so need you a good checking without additional fees. Maybe you need multiple accounts and want to view them online all in the one place, perhaps you just need a low interest credit card which shows your transactions quickly so you can keep on top of everything. Consider all of your small business needs and look for the relevant features at the best rate.
At some point, quite likely sooner than later, you are going to need to borrow money. All of the features in the world aren’t going to help you with this, it ultimately comes down to what you can offer the bank in terms of collateral, but developing a good working relationship with them will help. There are pros and cons to using bigger or smaller banking institutions in this case, so it is worth spending time developing an understanding of their requirements before you go too far. Some of the bigger banks tend to very focused on corporate finance and may not be very flexible, while smaller banks might be more flexible but don’t have the same leverage as a bigger bank.
Smart business banking
As I’m sure you do with your personal finances, it is always good practice to shop around every so often to ensure you are getting the best service available. Finding a better deal doesn’t always mean moving all of your finances, it might be as simple as talking to your bank about how they can service you better. This is certainly where a good relationship is helpful, I’ve been able to negotiate some very significant reductions with banks simply by asking if they can do better or at least match a competitor.
A good bank can be an invaluable part of your small business, not only by supplying capital, but also by working with them to plan for the future. Spend the time finding the right bank for your needs and build a good relationship with your banker, it’s definitely a worthwhile investment.
What business banking features do you value the most?
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