Many small business owners select their banks out of convenience or loyalty. However, taking the time to audit your accounts and to ask tough questions can positively affect your bottom line. Not only could you save money on fees, you may also build a relationship that brings more business to your door.
According to the American Bankers Association (ABA), following these steps can improve your banking relationship or help you to select a small business bank that's best suited to your needs.
How to Build a Profitable Banking Relationship
1. Get to know your branch manager and business relationship manager
Build connections with decision makers at your branch, and plan to have face-to-face conversations over the coming year. Review your personal accounts, showing your commitment to bringing business to your bank in exchange for its help to grow your enterprise.
Ask about how you can qualify for free services and discounted rates on employee credit cards, home loans, and other bundled products. Loyalty pays off with lower rates and less overhead that comes from managing accounts at multiple banks.
2. Ask for feedback on your company's performance at least once per year
According to ABA officials, many small business owners fail to take advantage of their business banking specialists' experience with helping companies grow. They recommend scheduling a formal, annual briefing where your senior team can present to your bank's relationship manager, your branch manager, and other key members of its staff.
They can provide feedback about your financial performance, your areas of opportunity, and your prospects for growth. Their questions and concerns can help your team sharpen its pitch to potential investors and partners.
3. Track how often your bank's relationship manager brings you business ideas
An effective business banker understands how to cultivate collaboration between his or her clients. If you have delivered a memorable presentation, your banker should be mentioning you to other customers. Likewise, your bank should reach out to you when it encounters a customer who can help fill one of your company's needs. If your relationship manager only calls you to sell you new products and services, consider taking your business elsewhere.
4. Ask about the state of your bank and its plans for growth
The ABA recommends that small business owners ask their relationship managers hard questions about their institutional track record. If your business exceeds the customary limits for federal deposit insurance, inquire about whether you can benefit by placing deposits in a program covered by the Certificate of Deposit Account Registry Service.
Review the security measures your bank has installed to protect your funds from fraud or mismanagement. Ask about what the bank has done to cultivate business in your community and in your industry.
You may not be looking for a bank loan now, but building the right connections and demonstrating loyalty can help you earn a preferential rate when that time comes. If your business faces theft or fraud, you can count on personal help from a live person instead of struggling with remote call centers. An effective account manager can proactively offer savings on service charges and bank fees, knowing that your long-term relationship means significantly more business over time.
Joe Taylor Jr. has covered personal finance and business for more than two decades. His work has been featured on NPR, CNBC, Financial Times Television, Fox Business, and ABC News. He recently completed a personal finance book entitled The Rogue Guide to Credit Cards; (Rogue Guide Books, 2012).
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