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The key questions to consider when choosing a business bank

Cheryl Smith Profile Picture

When a bank or credit union seems to be on every corner, how do you choose the one that is right for you and your business? What should you look for and why is this important?

As a business owner, it's important for you to determine what your banking needs are and how you want to manage them. It is also important for you to have a good working relationship with your bank and your banker because you're going to share the most intimate details of your finances with them. They will be critical in helping your business realize your goals and plans for growth by providing the financial services you need. Let’s look at some key questions to consider when choosing a bank for your business.

What should I look for when choosing a bank for my business?

Find a bank that understands your business and will support your business needs. Whether you’re a sole proprietor or running a business with more than 100 employees, the bank you choose to work with should be able to provide the products and services you need, including deposit accounts, commercial real estate loans, working capital and operating lines of credit, and more.

Why is it important to choose a bank that understands my business and industry?

If your bank understands your business and industry, it will understand the ebb and flow of cash coming in and going out. The bank will also understand if your business is seasonal or year-round. It is important to explain this to your banker and provide them with the documentation that supports your cash flow so that when it comes time for a loan or line of credit, there is documentation to support whether you will be able to repay what you borrow.

How can I get comfortable and move forward with a bank?

When it comes time to establish a deposit account with a bank, interview the banker you are meeting with. If you have a comfort level in simply discussing your deposit needs with them, chances are you'll be comfortable discussing your finances and financial needs. Be open in your conversation regarding financial challenges you may be having. This will allow the banker to make recommendations on what could potentially help make you creditworthy and present options that could correct any issues so that you can qualify for a loan when that need arises.

If you are not comfortable discussing your finances and sharing potential opportunities, challenges or successes, it's going to be difficult for your banker to help you achieve your financial goals. Whether it's a loan to buy a building, an operating line of credit or anything else, the banker needs to understand your business. This will help them make recommendations and write a credit request for you.

What documents should I have to establish a deposit and loan relationship?

Sharing the proper documents with your bank and banker is part of developing a transparent relationship. When opening any type of account or applying for a loan, a bank is going to need verification of your identity as well as your business. Banks need to know who you are and what your business does. And like you as a business owner, banks are highly regulated, so having the proper documentation keeps them compliant and protects you as a customer.

Below is a list of some of that documentation. Your specific requirements will depend on how you are structured, whether that’s as a sole proprietor, an association, a limited liability corporation (LLC), a nonprofit or something else.

Documents for a deposit account:

  • Articles of incorporation

  • Federal tax ID

  • Certificate of assumed name (DBA if applicable)

  • State agency certificate of good standing

  • Formal partnership agreement

Documents for a loan:

  • Tax returns

  • Profit and loss statement

  • Income statement

  • Balance sheet

  • Projections

  • Business plan

  • Giving units (if nonprofit)

What else should I think about?

Once you’ve selected a bank, gotten comfortable with a banker and started to open accounts, there is still ongoing work needed. In order for your business to continue to grow, you must think about what you need to do to develop your business. You should have an ongoing business plan that is reviewed at least annually. It should also change as your business changes. You’ll want to keep your bank partner updated on your business plan and invite them into the review process.

You should also decide how you're going to manage the finances for your business on a day-to-day, monthly and quarterly basis. Consider working with an accountant, as most financial institutions are looking for audited financials. It is a good idea to interview that accountant, just like you did with your banker, as you are going to put a lot of trust in them to handle your finances. Be sure to keep your bank looped in and share the necessary financial documents throughout your relationship.

Addressing these key questions should hopefully help you move forward with the bank that is right for you.

Cheryl Smith Profile Picture

About Cheryl Smith

Cheryl has over 17 years of banking experience with consumer and business banking and 20 plus years in the finance industry. Also, she previously owned a small business with her husband in rural Minnesota from 1997-2003. Cheryl joined Bremer in fall 2014 as a Branch Manager at our Minnetonka location and eventually added the St Louis Park location to her team. Prior to Bremer, Cheryl worked for U.S. Bank as a Branch Manager and served on the Melrose CentraCare Foundation board from 2011-2013. Cheryl previously worked for Bremer from 1999-2003 at our Marshall and Alexandria locations as a Teller, Executive Assistant and Personal Banker.

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