7 Questions to Ask Yourself When Shopping for a Bank

7 Questions to Ask Yourself When Shopping for a BankMany business owners make the mistake of spending more time researching the costs, choices, and features of a $100 office chair than they spend researching the costs, choices, and features of the bank that will finance their business loans worth 100 — or even 1,000 — times that amount.

It seems obvious that choosing a bank for your business should be based on more than which branch office is located nearest your company or who serves the best coffee and cookies in the waiting area. Yet such trivial niceties are often enough to tempt even savvy business professionals into making a hasty decision on choosing a bank without shopping around.

When shopping for a bank, you need to understand the best financing options for your particular situation, how much your desired services will cost, and precisely which banking services you need — both now and in the future.

Never get “emotionally attached” to your bank. It’s just business. You know enough not to do this in your business dealings, so don’t do it with your bank choice, either. Even so, do be on the lookout for a “simpatico” vibe you get from a lender who truly understands your business and your industry. That has implicit value when weighing your lending options.

To make the “bank shopping” process a little less daunting for you, we’ve gathered a few questions you should ask yourself when looking for a lender:

  1. Who will be your contact person? — Who will have ultimate lending authority at the bank you are looking at? Is it the local relationship manager or someone else at a lending office halfway across the country? When you have a servicing question with your loan, who will you be able to talk to to get the answers you need?
  2. What is the largest loan the bank can approve? You want to make sure that your future bank can not only take care of today’s lending needs but also assist you with your financing needs in the future as your company grows.
  3. What are the main criteria for underwriting loans? Does the lender value cash flow more than collateral? Do they place more emphasis on the business and the character of the owner, or do they just use a cut-and-dried credit score model?
  4. Is your potential lender comfortable working with the U.S. Small Business Administration (SBA) loan system? This is important because SBA loans help protect the bank against default, which makes it easier for them to lend you money. Larger institutions are likely to make loans backed by the SBA, which lets them accept riskier borrowers.
  5. What are the current loan rates? According to the National Federation of Independent Business, which is an advocacy group for small businesses, rates charged by large financial institutions “are systemically lower” than those charged by community banks.  Also, larger banks are more likely to issue corporate credit cards and usually have more borrowing options than smaller institutions.
  6. Does this lender favor the business/industry I’m in? The industry your company is in makes a big difference to a lender. While they will never tell you this, each bank has industries that they aggressively seek lending opportunities in and others that they would rather not choose to lend to.
  7. What other banking services does the lender offer? Things such as online banking and remote deposit capture may be of importance to you. And as you review the list of services each lender offers, think long-term: Are there any services you may not need now, but you will in the next 3–5 years?

If checking into all of these criteria seems overwhelming or too time-consuming, we can help you find a lender who it just the right fit for your borrowing needs. Our team of Financial Advisors will “bank-shop” for you, so contact us today to see how we can help get the ball rolling for you.

For more tips on how to avoid other banking-related pitfalls, see “Top 4 Mistakes Business Owners & CFOs Make When Financing Equipment.” And stay up to date on all the latest industry news by subscribing to our blog: Spectrum News.

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