Banking is a huge part of running a small business. Between acquiring a loan, opening an account, and keeping up with paperwork, it helps to know the tricks of the trade. We asked our small business experts what they’ve learned about small business banking since starting their businesses. Here’s what they had to say…
“When choosing a bank, it is important to not only pick a bank that meets your needs as it stands today but one that has the ability to meet your needs as your business grows. In addition, make sure that you are clear about the fees associated with your account. Is there a cap on the amount of monthly transactions that you can have before certain fees kick in?” –Idowu Koyenikan, Grandeur Touch, LLC
“What we’ve been surprised to find is that the best business checking account isn’t necessarily from the same bank as our preferred personal checking account. To be specific, most members on our team love Bank of America for our personal checking needs for the convenience and low balance minimums, but their business checking account carried a $216 annual fee. Given the number of monthly transactions and average daily balance we were planning on having, TD Bank offered us totally free business checking.
The lesson here is to do your due diligence on business checking accounts and don’t just assume the bank that you know and love will work best for your business.” –Brandon Baker, Loveletter Cakeshop
“Apply this dogmatically if you want to stay in business. How well do you understand your next 6 month’s cash visibility? That is the timeframe you must think about to be bankable or financeable.” –Gary Patterson, The FiscalDoctor
“Cash is vital to small businesses, so ensuring your clients pay on time is essential and cloud software exists that can help from accounting to taking payments. It’s also worth exploring overdraft facilities, these may not be required right now, but they can take a while to get in place, and may be crucial at some point in the future. Finally, it’s worth making sure you are on the best package from your bank, typically we’ve found ‘online only’ packages are a lot cheaper, and provide all the services we require.” –Tom Craig, Impression
“(1) Banks are in the business of making money….on everything. I encourage wanna-be entrepreneurs’ to borrow money while you have your day job in advance of starting your business and pay it back to establish credit before you really need it. Banks do not lend money to people with poor credit and no assets as security.
(2) Develop a relationship with a bank represented by a great small business banking representative who truly gets small business. This person will actually come to your office to make a call versus seeing you in his/her office on a rare occasion or as the employee turnover forces you to deal with people you do not know.
(3) Remind your bank of the number of services that you are subscribing to from their bank and how much revenue or interests that they are making from your business when negotiating interest rates. Services like payroll, unsecured/secured lines of credit, credit cards, atm access points and basic banking fees (plus other ancillary referral services as directed by them) are all revenue generators for banks.” –Linda Carey, Vibrant Business Today, LLC
“As my business grew, I realized that I needed more than one banking relationship or I should have created my first relationship with a bank much larger than I needed at the moment. I was always told to develop a strong relationship with my banker before I need them, but as my business grew, I recognized that the local community bank with whom I had the strongest relationship was no longer able to satisfy my banking needs as they didn’t offer online banking, EFT, a line of credit and international banking was not simple.. Thankfully, we received a good recommendation from a business colleague, and even though we are paying more banking fees, this international bank was able to give us the necessary line of credit as well as set us up with online banking and a business banking representative – all of which I’m now satisfied.” –Sandi Webster, Consultants 2 Go
“Find a bank that caters to small business and make sure you get to know the people you are dealing with. I have lunch with my banker from time to time. I also call him directly when I am not getting the attention I think I need.” –Kathy Lynch, Law Office of Kathleen Lynch
“I deal with Bank of America and sometimes wonder if I should work with a smaller bank that more understands my needs. My biggest tip to a new business owner is to be organized. Use quickbooks. If it ties in with your bank, even better. If looking for money, have a polished, professionally done business plan. Show banks gradual success and good ability to control cash flow over time and pay bills- this goes further than any product or service you provide in having the bank have a favorable opinion of you as a business person.” –Walter Pletch, Vetpark LLC
“My best small business tip is to break your income goal down by month, week, day, AND hour so that you have an incredibly specific understanding of what you need to do to meet your goals. Once I started tracking my income by week (not just hour, month, or year) I was able to make incredible progress towards my goals, eventually leading to my first five-figure month as a freelance writer.” –Sarah Greesonbach, FiveFigureWriter
“As a small business I have learned a lot when it comes with dealing with banks. The most important thing I learned is to not assume your current bank is best for your business. Before opening a new business bank account it’s best to shop around. Your current personal bank might be your first choice, but there is a good chance another bank will offer your business better fees, a more personal service and better access to credit.” –Lisa Chu, Black N Bianco
“It is important to keep your bank account reconciled. We reconcile our account once a week. If you put it off too long, it makes it extremely tough to catch up.” –Dave Ashworth, The Quantify Group
“Having reviewed records for hundreds of clients, I’ve seen the disparity in bank fees can be huge. Ostensibly “free” accounts get hit with analysis and other tack on charges that are not quoted when the account is opened. Read the fine print very clearly and ask the banker if there are ANY fees charged aside from overdrafts.” –Micah Fraim, Micah Fraim, CPA
“The hardest decision will probably choosing between a national or local institution. They each have their pros and cons, and even these will vary from business to business. While larger banks can offer better rates, you’ll never get that same one-on-one relationship. Be sure to read the terms thoroughly. Free does’t always mean free, especially when your business is conducting hundreds or thousands of transactions a month. Always read the fine print.” –Nicole Sparks, BuySparklers.com
“An awesome banking tip for small business owners is to set up a separate banking account that you do only business income and expenses from. That way you have an easy profit and loss statement. It also makes it a breeze to pay yourself and pay your taxes (quarterly income statement).” –Kassi Fetters, Fetters Financial Services
“The best banking tip I was ever provided is having more than 1 account. We split everything out, so we have accounts for staff wages, directors, office improvements, print (as we’re a design agency) and more.
This means once the money comes in its allocated straight away, so at the end of the month you can easily see where more money needs to be saved or can be spent. This makes budgeting and forecasting much simpler.” –Ross Davies, Strafe Creative
“Save a trip to the bank by depositing checks from the mobile app. Most banks these days offer their own mobile app which allows one to do most daily banking tasks without leaving your desk or when on the go like checking balances, transferring money between accounts, and depositing checks. It’s faster, accurate, and convenient.” –Charles Carlini, Carlini Group
“Choose a bank with a physical branch near you so you can personally get the
answers to the questions you have. A business bank account is somewhat
different from a personal one, and first timers will likely have a lot of
questions. This is much better than banking with an institution you can only call on the phone.” –Andrew Schrage, MoneyCrashers
“Get to know your banker! While online banking is awesome and can be a must in some instances, if you can bank with an actual brick and mortar institution in your community, do it! Building relationships in small business is a must, but your relationship with your banker could lead to numerous other connections and opportunities, including when you’re poised
to grow and need a cash or credit infusion.” –Eboni Truss, The Purpose Passion + Profit Group
“Use an international payment service instead of your bank for currency exchange. International payments are expensive transactions if you employ your bank to handle them. You would think that a commission between 3-5% on your transfer is not that big of a deal, but when you realise that the exchange rate applied is considerably different from the current market rate, you know that you’re wasting a lot of money. That’s why using an independent currency transfer service to support your international operations is the best way to go, being much cheaper and more efficient than your traditional bank.” –Marc Avedissan, Tramonex Ltd
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