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Loans > Business
Finding the right bank for your small business
JOYCE M. ROSENBERG, AP Business Writer. Associated Press
Copyright Associated Press
NEW YORK (AP) _ Ann Taylor, who owns a public relations firm in Houston, had been using the same regional bank for five years when she decided to ask for a line of credit for her company.
Much to Taylor's surprise, the request was turned down. Although she had more money on deposit at the bank than her company, Paradigm Communications, was seeking, the bank considered the line of credit too small to bother with.
"I was stunned," Taylor said. So was her accountant, who had accompanied her to the meeting with the loan officer.
Taylor ended up doing what many other small company owners do: migrate to smaller banks they find more accomodating and eager to work with a small business. These are banks that, because of their own size and focus, are able to give more attention to a smaller company, be flexible with lending and charge less for checking and other fees.
Many businesses benefit by moving to a smaller bank.
Mike Kiser, owner of Small Business Advisers, a Pewaukee, Wis., consultancy, said of company owners, "What they're trying to do is set up a good, long-term relationship with someone that will be an adviser to the business. They want to be talking to an individual who is experienced, who has loaned money to many, many small businesses, and who understands the nuances of the size of a business."
Jennifer Hawkins already had a business track record with a big New York bank, but when she tried to get a line of credit for a new venture, she found herself lost in a bureaucracy, never really getting a response, and never being able to talk to the same person twice. She had the sense that her four-employee business was too insignicant.
But even in a big city like New York, there are smaller banks. Hawkins found one that had only four branches and that was anxious to give her personal service. She wanted, and found, the kind of adviser that Kiser recommends.
"I needed someone to help guide me," she said. "It was a completely different kind of experience from a huge multinational instituational bank."
The big banks are well aware of such criticism, and, hoping to win small business customers, have come up with accounts that have lower fees or even no fees and business credit cards that award frequent flier miles. Some are making financial advisers available to business customers who keep a minimum balance on deposit.
In looking for a banker, Kiser suggests business owners do plenty of research not just into the bank, but a particular loan officer, the person who's likely to be most closely involved with the customer. It's critical to find an officer you're comfortable with, he said.
Alice Magos, a senior writer/analyst at CCH Inc., a financial information firm, says owners should visit several banks and interview them, asking detailed questions, including, "What fees exactly do they charge for various kinds of transactions? Do they charge for every time you make a deposit? Are they part of the Small Business Administration loan program? What kind of minimum balance do they require?"
Perhaps most important, is to find out, "Do these people seem to understand my business or my kind of business? Will I be with a specific officer each time I come in or are they going to shuffle me around?"
On its Web site, CCH has a guide to selecting a bank. It's located at www.toolkit.cch.com/text/P10(underscore)3200.asp
There are many times that a small business owner can have a great relationship with employees at the local branch of a big bank. But problems can develop when you want something that conflicts with rules set down by headquarters.
Mike Ballard, who owns Ballard Communications in Las Vegas, wanted a $5,000 line of credit from his bank. The local loan officer told Ballard to come up with a solid business plan, and the branch would see what it could arrange for him.
It didn't work out. "These guys locally had no leverage at all," he said.
Your own personal history with a bank also might be of little help.
Ronn Torossian, president of 5W Public Relations in New York, knows that his business is too young to get a loan. But he thought that the bank where he'd taken his personal business for 15 years, might give him a break on fees. It didn't.
When he shopped around, he found that most banks in the city were charging $35 or $40 a month for business checking accounts or requiring $25,000 in balances for free checking.
Torossian ended up with a newer, smaller bank that's giving him free checking for only a $1,000 deposit.
Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
People: Kiser, Mike
Dateline: NEW YORK
Text Word Count 782
The tips on this website should be considered food for thought only. Lendingtips.com is a clearinghouse of ideas, not a professional adviser. Before any important decision, please consult the appropriate professionals (lawyer, accountant, real estate agency, broker etc.).
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