Module 5: Banking Services
Choosing a bank
Every business is different. As such, the services you may need from a bank can differ greatly from another business in town. In selecting a bank, you want to think about some of your most common activities, so you can discuss options with a bank to simplify your financial workflow.
Here are some questions to ask yourself:
- Do I pay employees or vendors regularly? And if so, how do I pay them?
- Do my customers generally pay me via check, credit card, electronic transfer, or cash?
- Are mobile and online banking important for my business?
- Will I need to make deposits after banking hours?
- Do I handle cash? How can my financial institution help me manage my money?
- Will I need merchant services now or in the future so customers can pay me by credit or debit card?
- How can my bank help me keep proper financial records and manage cash flow?
These are just a few of the many questions you want to ask before speaking with a banker. They will want to know about your business and your many financial needs. In many cases, banks bundle services for small businesses so that you can streamline your accounting and recordkeeping.
If they have an app that works on your phone, ask them what features it has and what you can do remotely. For instance, if you don’t receive many checks as payment, you may want to see if the bank allows you to deposit checks through your phone. Other services you can do by phone may include online transfers between bank accounts, fund transfers to vendors and suppliers and cash flow dashboards.
Selecting the right bank for you
Selecting a bank is highly personal. If you haven’t had a relationship with a bank before, there are some things you should look at to ensure you are comfortable with the bank you choose. Moving corporate bank accounts from one bank to another isn’t as easy as moving a personal account, primarily because you may have many interconnected services such as payroll, merchant services, automatic payments and mobile banking. So you want to take the time necessary to find a bank that 1) you’re comfortable and confident in, and 2) won’t outgrow as your business grows.
Nearly 63 million adults across the nation rely on costly alternative financial services – like cash checkers, payday lenders, and pawn shops – for routine financial transactions. The services of these businesses can cost an individual as much as $40,000 over their lifetime.
If you haven’t had a bank account before, some banks have created a low-cost, low-free account program for new customers that is safe, secure and are certified by regulatory authorities. BankOnWashington offers several certified banks that will help you establish an account and build your credit.
If you know other small business owners in your community, they are an excellent place to start your research. They have their own experiences with banks in your town and may even be able to introduce you to their lender or account manager. Consumer reviews on social media or the opinions of your friends and their personal banking choices may help further inform you.
As you do your research, here are some things to consider:
Customer service is important. Many financial institutions don’t have 24-hour customer service anymore. That isn’t a deal killer. But as you look at a bank’s services, consider your own needs as a customer, so you don’t go into a relationship with a financial institution that doesn’t match your needs.
Account access means more than bank staff being available to answer your questions when they arise. It also refers to whether you have physical access to your money and the bank branch, as well as whether you can access your funds quickly and cost-efficiently and use bank services virtually. For example, online banking allows businesses to conduct nearly every facet of their banking without going into a physical bank. Advantages of banking online include 24/7 access to account information, store images of cashed checks and account statements.
Technology is another important consideration. For example, most banks generate reports that can be integrated with business accounting software such as QuickBooks or GoDaddy Bookkeeping. Having all your business and personal accounts under a single account login may provide added convenience. Just be sure that you aren’t comingling personal and business funds.
Specialize in small business products and services
Discuss banking products, including accounts, loans, online options and investment services with key bank staff. Some financial institutions specialize in small business products and services, such as SBA or other government-guaranteed loans. Often these banks will be designated as SBA lenders or have staff positions such as a vice president for small business loans.
A word about deposit insurance
If you are new to the idea of trusting a bank with your money, you should know that since 1933 no one has ever lost a penny of deposits insured by the FDIC. The Federal Deposit Insurance Corporation (FDIC) was created by Congress to maintain the public’s trust in the nation’s financial system. This includes insuring the deposits of individuals and small businesses.
Not all financial institutions are insured by the FDIC, so you may want to ask if the bank you are thinking about working with is insured up to the limits guaranteed by the FDIC.
The following section provides some details on FDIC deposit insurance coverage that may pertain to your business.
Basic FDIC Deposit Insurance Principles
- Deposit insurance coverage is per depositor. A depositor may be any person (does not have to be a U.S. citizen or resident) or legal entity (such as businesses, nonprofit organizations or government agencies).
- FDIC insurance covers all deposit accounts, including checking and savings accounts, money market deposit accounts, and certificates of deposit. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
- If you have questions about deposit insurance coverage, please get in touch with an FDIC deposit insurance specialist at 1-877-ASK-FDIC (1-877-275-3342), or use the FDIC’s Electronic Deposit Insurance Estimator.
- Credit unions may also be insured by the National Credit Union Administration, another federal government agency that is similar to the FDIC. You can learn more about their rules at the NCUA’s website.