7 Effective Tips for Small Business Banking

Banker in office

As a small business owner, running your day-to-day operations and finding your next source of income can consume most of your time. A crucial aspect that business owners tend to ignore is their small business banking relationship.

Business owners should do careful research in choosing the right bank for their business and industry. This article will highlight effective tips to help small business owners navigate banking choices.

1. Your personal banking relationship might not be the right choice for your small business banking. 

Small business owners often open up a bank account where they currently do their personal banking. Sure the convenience is great, but your small business could be incurring heavy monthly costs or even transaction fees by doing so. By relying on your personal bank, you could be leaving hundreds of dollars on the table that could be reinvested in the business in the form of monthly savings.

2. “Free” business checking can still lead to monthly fees and costs for the business.

Often banks lure small business customers with checking accounts advertised as “free” if the client meets certain requirements. Most will require some minimum monthly balance, which can be challenging for start-up and growing businesses. Some “free” checking accounts may charge transaction fees (up to $1 per transaction) if you go over a certain number of transactions on a monthly basis. So if you are a business that relies on a large volume of transactions each month, pay heed to what your transaction limits are! 

3. Credit unions and community banks often have better customer service and lower fees than traditional banks.

 A good banking choice for some small business owners may be a community bank or a credit union due to their affordability and attentiveness to customer service. Smaller institutions often dedicate more resources to help foster a sense of community with their clients. Some of these institutions are also mission-based nonprofit banks that focus on community development, which results in more flexible banking solutions and affordable rates for clients on multiple bank products.

One word of advice on this note, while this type of banking institution is a fit for businesses with limited local operations, business owners looking to grow a large footprint might run into problems.  Make sure your bank operates in the areas or states where you might expand your business.

4. Not all banks, credit unions, and community banks are created equal.  

Many business owners simply choose a bank based on convenience and cost without planning for future growth. With such a short-term outlook, business owners often fail to find a bank that might best be suited for their future needs. Different banks have different risk tolerance for different businesses and industries. Some banks, for example, finance restaurants while others do not. So make sure to do your research. 

Ask the bank what type of experience they have in financing your industry.  Also, ask some key questions: 

  • Do you offer small businesses lines of credit and term loans?
  • What do I need to be eligible for a credit line or term loan?
  • What types of terms and conditions come with these types of loans?
  • What documentation do I need to apply for these loans?

You might just find that the bank you previously overlooked because of a slightly higher cost is actually the best one to fund the future growth of your business.

5. Make sure you have a two-way relationship with your small business banker. 

Often times, small business owners have a very limited relationship with their bank, mostly checking transactions (e.g. deposits and debits). Do not forget that a good relationship with your banker could benefit your business in many ways.

Many business owners who were able to get a credit line or small business loan, had fees reversed, and even received temporary overdraft protection in the event of low funds – all due to the trust and track record they built with their banker over the years. So get to know your small business banker and make sure s/he knows you!

6. Research the bank’s reputation before entering into a relationship.

Talk to colleagues and businesses in your network to find out what their banking relationship looks like. Business owners are happy to share their experience with their bank, especially if it was negative. They can tell you about their experience with the lending process and obtaining credit. Ask about the reputation of their banker and how they support small business growth. Find out which bank will not only give you the best services, but is willing to go the extra mile for you.

7. What innovations and convenience does the bank offer small business owners to make their lives easier?

Finally, do not forget that some financial institutions offer small business owners incredible tools to make their transactions faster and more efficient. For example, look for free online bill pay where payments can become automated on a monthly basis, which saves both time and money. Other financial institutions can offer services to track expenses and monthly charges so you can better understand how your business is changing over time.


Choosing the right bank is a critical decision for small business owners. A strong relationship with your banker can prove to be valuable when growing your business. A good small business bank will make sure qualified small businesses have adequate credit to support their business, offer solutions to problems, and go the extra mile to ensure continued growth.

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