Everyone is looking for ways to cut costs and save money. And with things as they are, the banking industry may be making you consider a relationship with a different bank.
Whether or not you are satisfied with your current bank, abundant media attention covering the financial industry may inspire you to shop around. When was the last time you “interviewed” banks? When was the last time you considered your own business goals in relation to your bank’s objectives for the future?
“Before you decide to change banks, conduct an evaluation of what your business needs are today and what they may be in the future, based upon current economic conditions,” says Darlene Nowak-Baker, executive vice president and lending manager with First Place Bank. “Once you have figured out your needs, you can begin the process of selecting a financial institution that has a talented team to provide products and services to meet your needs.”
Also, prior to entering a new banking relationship, make sure you select an institution that will serve your business needs not only now but years down the road.
Smart Business spoke with Nowak-Baker about shopping banks and what to look for when you do so.
What must business owners do to prepare to ask the right questions when shopping banks?
Before you do anything, evaluate your own business. Where are you today, and where do you see the company heading in the next three to five years? What will revenue look like? Will you expand your facility, move to a new location, potentially add more products to your lineup or hire more employees? What are your immediate growth goals, and what are your objectives for sales/growth in five years?
Will your lending needs be great, or is acquiring capital not an issue in coming years? This is important because you want to make sure the new bank you partner with is equipped to handle your banking needs down the road. Be sure to ask this question.
Finally, spend some time defining your company culture and business philosophies. The financial institution you choose should share these mindsets. You will share intimate business information with your banker and should feel comfortable and on the same wavelength as him or her.
What mistakes do business owners make when choosing a new bank?
The bank on the corner or across the street from your office isn’t necessarily the best match. In real estate, location is king. In banking, convenience is critical, but that doesn’t necessarily mean the bank should be located within eyeshot of your headquarters. You want to partner with a bank that provides the best service and the products that you need.
Should you decide to do business with a financial institution across town, you could always retain a payroll account at a neighbor bank for the convenience of employees with payroll accounts at your business. With the ease of today’s electronic banking, you can seamlessly transfer dollars online from one bank to another.
This arrangement is necessary in some instances, but ideally, once you decide to move your banking business, you should move all of your business, including loans and deposits.
How important is pricing when choosing a bank?
Pricing lures business owners to the front door of a bank, but prices are deceiving. Is the bank truly offering the level of service and product portfolio that your business requires? As with anything, you get what you pay for. Be sure to shop more than one bank. Interview several prospects and do not rely on a single referral from your accountant or attorney.
Do check out the bank your advisers suggest, but don’t limit yourself to that one. Also ask peers in the business community who they bank with and why. During networking events, pose the question: Who is your banking partner? Most business owners are open to providing candid feedback. From there, visit several banks that can fulfill the objectives you identified for your business. Just because a bank coins itself as ‘business-friendly’ doesn’t mean it will retain that philosophy. Look for a bank that communicates a consistent message about its culture and philosophies.
Who should be involved in choosing the bank?
Usually, the CEO or business owner, along with a chief financial officer or lead accountant at the business, will be involved in the banking decision. Be sure that everyone is on the same page, prioritizing relationship, cultural fit, products, services and the financial health of the bank.
When visiting a bank, speak with more than one representative. Talk to the senior lender, a retail manager or someone in treasury management. Ask to meet with a member of senior management.
Be sure each associate communicates the same ideas and that you click with more than one person. In case of turnover, you want to develop relationships with several associates who will take the time to understand your business and needs.
Darlene Nowak-Baker is an executive vice president and lending manager with First Place Bank. Reach her at (248) 358-6403 or DNowak-Baker@fpfc.net.