Picking the right bank for your start-up business

When it comes to picking a bank, often the first bank that gets picked for a business is either the closest bank to that business or the personal bank of the owner. The business owner doesn't realize the mistake that he or she has made until the company needs a loan or other banking services that the local bank just can't provide.

At some point, if you are growing, your company is likely to need a loan, whether it is to keep you afloat while waiting for an extra slow customer to pay their bill or to buy a new piece of equipment increase your product output. The wrong time to ask for that loan is right when you need it. And even worse is having to leave your bank and find a new bank because your old bank doesn't provide the service you need.

When you are developing your business plan, think about the type of bank you would like to have as a partner in the business. If you are planning a local company and will have local clients, a local commercial bank is a good choice. They are small enough that you can get to know the lenders at the bank and often they will know and have banking relationships with your customers. If you are planning for significant growth, bank with a larger bank that will be able to handle your needs. Get to know your local bankers, but watch your credit carefully. A large bank is less likely to lend on character than a local bank.

If you want to operate solely online, you will need to have a bank that handles extensive online transactions. But once again, test your customer service often. If it does not live up to your standards on a day-to-day basis, it will definitely fail in an emergency situation. Look to see if the bank can provide other services such as payroll. The cost savings may make it worth going with that bank over another.

Finally, don't necessarily restrict yourself to one bank. If you are unsure of which bank you may need in the future, open accounts and build relationships with more than one bank. A large bank may be willing to lend against receivables which a smaller bank wouldn't be able to do while a smaller, local bank may be able to give you a better rate on a line of credit just on a relationship basis.

Don't get caught in the paralysis of choosing a bank, but do ask other business owners who they use and if they are satisfied. Interview a couple of banks and decide which one really seems to care about helping you with your business. Open your account and make it a point to get to know the managers and lenders at that bank. Ask what the lending criteria are and consider opening a small line of credit and using it judiciously. If you have selected a bank and realize that it is not the best bank for you, switch. The longer you stay with a bank, the harder it will be to break the inertia and as I said before, you don't want to switch right when you need to ask for a favor. The banking world is very competitive and just about every bank would like you as a customer. Spend the time necessary to give the right bank your business.

Please visit my website for more small business finance advice: http://cfoyourself.com

Article Source: http://EzineArticles.com/?expert=C._Worrall

Technorati Tags: Money Start-up