Back in the day, it was typical to open a bank account at the same local bank where you had your personal accounts, and thus, a history and at least a passing relationship with (or the ability to form a relationship with) the bank President or owner. These days, that's more of a rarity. With all the bank consolidations in recent years, even banks that used to be "locally owned" have been merged into the various national brands, the highest ranking official in the branch is the branch manager (who often gets replaced at an unnerving rate), and you and your accounts have been reduced to little more than computer data. Sad to say, but banking has gotten very impersonal. Beyond that, much of the "relationship" aspect that used to mean something in a "banking relationship" doesn't mean that much any more, with decisions being based on credit scores and software algorithms as opposed to personal relationships.
If I sound cynical, it's because I have become so over the last 20+ years. My experience is that the bigger the bank, the more "like an account number" you will be treated. It's a case of the brochures and commercials looking nice (talking about their focus on small business, their excellent customer service, etc.), but the reality being very different. Dirty little secret: Relationship banking is still alive and well if you are a "major account"; but since most small business startups will be far from "major", we can safely assume that you aren't on that list.
Having said that, if you can find it, a small local bank (where it's still possible to speak with the people that own the bank--or at least to their direct reports) is your best bet in most cases (see some caveats below). I'd say the smaller the town you live in, the more luck you'll have. To that point, I know of many people that have intentionally opened accounts at "small town" banks where they grew up, even though their business is many miles away in a "big city".
If you can't find it (and again, taking into account the points below), just about any bank will do. Most banks these days offer some variation of free checking for businesses, so do your research on-line to compare offerings from various banks that have branches conveniently located to you. Look for things like free ATM transactions, a free Visa Debit Card, low or no minimum balance requirements, etc. What you're looking for here is a safe place to keep your money, that costs you little or nothing to so do, and let's you conduct the most basic of banking functions--making deposits and writing checks. Note: You'll find that business checking accounts that offer interest are rare (maybe impossible) to find for anything other than sole proprietorships.
Some other considerations for choosing a bank (in no particular order):
- Compatibility with Quicken or QuickBooks
- Web-based access to your accounts (even better with check imaging)
- Free e-check service (via Quicken/QuickBooks and/or web)
- Overdraft protection (although rare on business checking accounts)
- Secure night deposit if your business deals with a lot of cash
What about SBA loans? That's a subject for another post, but let me note here that if you plan to apply for a SBA loan, you will specifically want to look for a bank that's a SBA Certified Lender, or better yet, a SBA Preferred Lender. You can search on the SBA website for a list of banks that fall into these categories.
What about "conventional" loans? Again, a subject for another post, but here it all boils down to collateral. With the exception of small "signature loans" (that amount to credit card accounts without a card), banks only loan against collateral, and further, against collateral that they understand (i.e., if you want to borrow money for farm equipment, talk to a banker that understands farm equipment). As a general rule, the big banks are great for "signature loans" (of course, this is your personal debt based on your personal credit history, not the company's), while the small banks are better for "specialized" loans (keeping in mind that these essentially depend on the bank clearly understanding how to quickly liquidate your collateral if you default on the loan).
What about wires? The fact is that any bank can send and receive wires (electronic transfer of funds from one bank to another), but if you expect to do a lot of wires--and especially if timing of "funds availability" is important--you'll want to avoid a bank that relies on another bank for their wires. I've never personally had an account at such a bank, but I have encountered them on the other end of the wire. None of the big banks have this problem, but a lot of small banks, especially those in smaller towns, often rely on a bigger bank to facilitate the wire. This can cause confusion and delays in the wire process. Also, again if you expect a lot of wires, look for a bank that let's you initiate and monitor wires on-line.
What about foreign currency transactions? Definitely a topic for another post, but as it relates to choosing a bank, if you expect a lot of foreign currency transactions, you'll want a bank that is well versed on this. As you might expect, this often means going with a larger bank, as small local banks often think only in local currency.
Bottom line, there are lots of pros and cons to weigh when choosing a bank. There is no single right answer or one type of bank that's ideal for any business. I've promised several other posts dealing with various banking and financing related topics, so admittedly, this only brushes the surface. Whatever you do, spend a little time up front to itemize your needs and research the various options before you make a decision. While it's not impossible to change banks in the future (and you almost surely will as your business evolves), that's a nuisance you don't need in the early stages of your new venture.
One final note on the topic of "e-banking" (working with a bank that has no local presence--at least not local to you)--a great example of this is E*Trade Bank (although most of the big national banks provide this as well). They're a great bank (I use them for various personal accounts), but even in today's "Internet age", there are certain times when you'll find it useful and even necessary to have a local physical branch you can walk into and conduct a transaction. This is especially true if your business will get a lot of paper checks or will deal in cash (with cash being a virtual showstopper).
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