As a small business owner, choosing a bank is just one of the many important decisions you need to make. But the sheer number of banking options out there can make the task seem daunting.
Start the decision-making process by examining your banking habits over the past year. If you are a brand new business owner, you can use your financial projections to answer most of these questions. How much cash did you have on hand each month? What was your monthly spending? Did you need access to additional capital? What banking fees and charges did you have to pay each month? How often did you feel inconvenienced by the process of depositing or accessing cash? The answers will help you understand what your small business needs most from a bank.
Whether you’re just getting started with your business or looking to reduce your existing banking fees and/or inconveniences, here are four options to consider.
They have branches and ATMs throughout major cities, typically offer a wide range of financial services and products, and sometimes can feel like the safe, easy choice. However, there are numerous restraints and fees related to a brick and mortar bank account. And for a small businesses where cash and resources are tight, those fees and inconveniences can make a big difference. Even with a “free” small business checking account, you could incur fees for too many cash deposits or withdrawals or failing to maintain a minimum balance. It’s also important to consider that the perceived convenience of nearby branch locations could change in the near future. Retail bank branches throughout North America have been closing at an annual rate of 5% since 2012 (S&P Global Market Intelligence), a trend which is expected to accelerate.
Community Banks or Credit Unions
Community banks (banks with less than $1 billion in assets under management) and credit unions tend to have a closer connection to local businesses, are committed to giving back to the community, and value personal, long-term customer relationships. While customer satisfaction ratings are often high, small community banks can’t typically offer the same breadth of financial products and services as a traditional bank. And if you plan on scaling your business model beyond a single location, you should keep in mind that credit unions and community banks might have just a few locations and ATMs.
Credit unions and smaller banks are often laggards when it comes to technology and mobile apps. A 2018 Quick Hit Mobile Financial Services Survey of 565 financial institutions found that 14% of all respondents had “no plans to offer” mobile banking, the report said. Of that 14%, all but one had less than $500 million in assets.
If your business is essentially cashless, there is little need to keep an account at a traditional chain or local bank. Online banks pass the savings from real estate and personnel costs onto their customers with higher interest rates. They also offer convenient services, such as electronic transfers, online bill pay and mobile check deposit. However, there are usually fees associated with depositing or accessing cash.
When using an ATM outside of your bank's network (which is generally very limited for online-only banks), banks charge non-customers a fee between $2 to $5. Non-bank ATM operators often charge more, as high as $10 per transaction. Your own bank may also charge you a "non-network" ATM fee, typically between $2 and $3.50.
Open Financial Services Platforms
Since most small business owners deal with cash and work long hours, they often miss the typical banking windows for making deposits, accessing cash, paying bills or making instant transfers. Emerging fintech solutions are offering small business owners new banking options that make sense for their schedule and business. For example, the Clip Money platform connects leading retailers (like your favorite grocery or retail store) with banks directly, allowing businesses to make near instant transfers and access funds at any time. And that means that business owners can focus their energy on serving customers and growing their businesses, instead of worrying about what time their bank closes or how much cash they already deposited this month. According to Daren Trousdell, Co-Founder & CO-CEO of Clip Money, we are improving access and convenience for all Banking customers using innovative technology and a new customer experience. Our expectation is that people will become more frequent users of the banking system and improve their quality of life at the same time.
Clip Money is the most convenient way for consumers and small businesses to turn their cash and coin into digital money. On our LinkedIn page, we’ll be exploring small business banking, banking technology, fintech innovations and financial trends. Get in touch to learn more.