Most small business owners have an option of choosing between a large national bank and a small regional bank. Both have their pros and cons.
Pros of Small, Regional Banks
- With small, regional banks, you often get better customer service and one-on-one access to the loan officer. Such banks are usually more flexible and focus more on personal relationships and the borrower’s character than just the numbers on a credit report.
- Loan officers at smaller banks have the authority to make loan decisions. With them, the turn arounds for your decision may be faster than with a large national bank which will have to check everything with their corporate office.
Pros of Large, National Banks
- Large national banks may be able to give you a better rate than the small regional bank. So if you are more interested in that additional basis point and less on the flexibility, large banks may be better for your business.
- Small Business Administration (SBA) loans can be a great source of cash for small businesses. If you are planning to apply for an SBA loan, ensure that your bank will issue SBA backed loans. Large national banks are more likely to offer SBA loans than small regional banks.
- Large banks often give you additional perks that small banks may not be able to offer. Examples include payroll, sending invoices, collecting payments and issuing credit cards. However, be aware of additional fees for these services. A recent article on the American Express Open Forum suggests that banks have dramatically increased their fees for individual and small business accounts. According to J. D. Power, 46% of all bank customers reported a problem with bank fees so far in 2009.
Analyze the pros and cons of each option, and talk to officers at both kinds of banks before you decide on a bank for your small business. It is important to build a strong relationship with the officers of the bank no matter what size the bank is.
During this process, certainly discuss the bank rates with the loan officer. Negotiate the bank fees openly. If you can afford to maintain a high balance, then use that to drive fees and rates in your favor. Sometimes moving your personal banking too into the same bank will help negotiate a better deal.