by Narothnee Jean-Pierre
Around the world, small business are vital instruments to a countries economy. On average, small businesses are the “big businesses” that are creating jobs, generating growth, and innovating quicker. To get the resources needed to flourish, small businesses are looking to banks as well as other alternatives of financing to grow their business. According to the Small Business Administration, more than two-thirds of businesses use some form of financing to grow their business.
Whether seeking a business account, a loan, or a line of credit, finding a bank that fits your business’s needs is crucial. Luckily, we have created a list of what to look for in a bank for your small business because from the beginning you should be on the lookout for a dependable, trustworthy and supportive bank.
Understand Your Needs
Before meeting a bank, you need to figure out what your business needs are, and the cost to provide them. It’s best to outline your criteria; remember to be realistic, and to stick to your budget.
Many banks provide incentives such as introductory rates or free checking, but be cautious. In many cases, these promotions are only temporary and have strings attached such as high account balances. If you’re just starting out, and don’t have a financial advisor to assist with cash flow management then consider a bank that provides one as well as some financial information on your industry.
Compare Bank Features
Once you understand what your needs are, it’s time to research, and compare banking features. Here are some beginning points for you to pay attention to:
-Focus on finding a bank that specializes on your type on industry and business size.
-Make sure your bank has up to date technology that allows for faster and easier access such as online banking.
-If you prefer more face-to-face, your bank should also have an extensive ATM network.
-Review features, create a list of questions, and talk to representatives to find out more. Don’t be afraid to ask for exactly what you need.
If you have questions call, and develop a relationship with multiple people within a bank that you can trust. You should have more than one contact personnel that can advocate for you in times where your main contact is not there. A proactive relationship is fundamental to a successful partnership.
Big, Small, or an Alternative Bank?
Depending on your type of business as well as your credit history, you might want to consider a small, big, or an alternative lending source.
If you’re opening a neighborhood business then your community bank down the street will offer you a high level of human interaction that is hard to find elsewhere. Big banks on the other hand can sometimes offer lower rates, as well as more advanced technology to help your business grow.
For small business owners who don’t have great credit, alternative lenders such as OnDeck, Biz2Credit, and Kabbage are perfect resources due to their quick process, and openness to approve businesses without a perfect financial history.
Luckily for small businesses, approval rates at big banks have reached an all time high since 2011. According to a Biz2Credit report, big banks with assets of $10 billion or more, approved 21.3% of small business loan requests in January 2015, up from 21.1% in December. As stated by Biz2Credit CEO Rohit Arora, for big banks, small business loan approvals are up because the lenders can offer more competitive interest rate than their rivals.
Earlier this year, Wells Fargo Bank, launched a five-year goal to lend $100 billion in new small business loans to help more businesses succeed. Nordea, one of the largest banks in the Nordic countries, has partnered with Shopbox to provide small business owners with an integrated point-of-sale and banking service that can assist in their growth. “The idea is to help the business owner making more money, and managing liquidity better,” says Jan Sirich, Head of Experimentation and Learning at Nordea.
What this shows is an increase in interest in small businesses by large banks to grow the small business segment.
Whatever industry your business operates in, or whether it’s in the beginning or middles stages of development, it’s important to be strategic in your choice of a banking partner. Understanding every step, and building a solid relationship will help your business grow quicker, and minimize challenges.