A Bank to Bank On

Banks have evolved into financial services institutions that offer dozens of deposit and loan products. Besides traditional services, they now sell annuities, mutual funds, government instruments, insurance, and discount brokerage and bill paying services. There are many factors to consider before choosing your banking partner. The following are eight areas to focus on before tying the knot.

Location is the first convenience factor you should consider when forming a banking relationship. Is there a branch near your business? If you have stores in other communities, can the bank service those needs as well?

A bank's hours of operation are important if you need to do banking outside normal business hours. Some banks open as early as 8 a.m.; some stay open until 8 p.m.; some also offer Saturday hours.

Next, find out if the bank has a teller line designated for commercial deposits only, or if it has some other system to expedite commercial deposits.

Other convenience considerations are ATM machines, and drive-through and night-drop facilities.

In general, the smaller the bank, the more local the decision-making process is likely to be. However, today many larger banks have refined their small business lending efforts to better serve local businesses. Find out what types of homespun benefits a bank can offer your business.

In addition, many larger banks offer a much more comprehensive array of financial services that can be tailored to meet the needs of small businesses.

Bank failures are far more commonplace now than they were 20 years ago. Before committing to an institution find out how long it has been in existence, whether or not it is profitable, and how strong its capital base is by picking up a copy of the bank's annual report. While FDIC insurance provides some protection, it has a maximum coverage limit of $100,000 per account. Having your funds frozen for even a few days while regulators sort out a problematic situation could jeopardize the stability of your business.

Banking is a service industry, and the people factor just might be the most important feature of this list. Look for:

• Professionalism. Is the environment orderly and do employees demonstrate a proper level of respect?
• Knowledge. Are the bank employees able to answer your questions?
• Promptness. Do they return your calls in a timely manner?
• Community Involvement. Do you see bank employees involved in community organizations?
• Turnover. If you have been in the bank in the past, do you notice a lot of new faces?

Have the bank advise you about which type of checking account option would be the most beneficial for your needs. For example, many banks offer a flat-fee account for small businesses that demonstrate moderate account activity.

Other factors to consider are:

• Interest-Bearing Accounts. Compare bank rates on CDs, money market accounts, and other savings options.
• Sweep Accounts. Some banks offer a deposit product that will automatically "sweep" your excess cash into an interest bearing account on a daily basis.
• Funds Availability. Find out how long the bank holds funds drawn on another institution before making them available to your account.

Lending products and underwriting policies vary from bank to bank. When seeking a loan from a bank, here are the key components to consider:

• Types of Loans. Does the bank offer the type of loan you seek?
• Rates and Fees. Loan rates and fees are generally negotiable.
• Terms. Make sure the terms result in a monthly payment you can meet.
• Collateral Requirements. You may be required to pledge personal assets if your company is new or has had recent difficulties.
• Lending Limits. Make sure the bank is large enough to handle your current request, as well as any future ones you anticipate.
• Turnaround Time. Ask the loan officer how long it will take to respond to your request and to close the loan.

Here are some other services that can be of use to your business:

• Cash Management Services. These include lockbox services, sweep accounts, and other products.
• Insurance. Discounts on property and casualty insurance may be offered to existing customers.
• Annuities, Mutual Funds. May be important if you do your personal banking at the same institution.
• Trust Services. Valuable if you offer your employees pension, profit sharing, or 401(k) plans.
• International Services. If you deal with foreign suppliers you may need foreign exchange services and documentary letters of credit.

No matter where you are in the cycle of your gift business — just starting out or a 25-year veteran — take a close look at your financial institution needs and make sure you have a bank you can bank on.