In the small town of Mount Horeb where I live, there are five banks. A quick Google search of banks within a 20-mile radius turns up more than 100 bank locations. How on earth does a person — or a business — choose the right bank for them? Is there even a “right bank”?
In truth, most banks offer similar products and services. If you’re looking for a transactional relationship with your bank, you can shop around and find the “best deal” on your savings/checking accounts at one place, then get the “best deal” on your car loan at another place, and find the “best deal” on your mortgage at still another place.
You could do that.
I’m here to tell you that there’s a better way to do your banking. And while the little tenths of a percent you save here and there may feel good short term, there are significant advantages to finding a banking home that will add up to real savings in the long run. In other words, the “best deal” (purposely in quotation marks) may not be the best deal for real.
Finding the right match
Much like any relationship — a marriage, a friendship, or a business partnership — it’s important to find the right match based on your needs, expectations, and shared values. If finding the perfect mate were so easy, we’d all just count off and pair up with the person standing next to us. Instead, the right match brings out the best in you, helps you realize your full potential, and enables you to build the life you want to live.
Your bank can be that kind of relationship.
So how do you find your bank-match-made-in-heaven? These five tips can help you determine what to look for and where to find it:
1.Size matters.
Most people lump all banks together into one big category. In reality, there are large national/international banks and smaller community banks, each serving a somewhat different purpose.
According to bankrate.com, America’s 10 biggest banks hold $10.1 trillion in assets. The No. 10 bank needed $253 billion just to make the list. Why does that matter? If you are running a multibillion-dollar global company, you will require a large national bank to meet your needs for capital lending and cash flow, as well as the ability to manage international currency issues. This might also matter if you run a cash-based business that requires multiple locations spread throughout the country for on-site deposits.
Alternately, if you run a small or mid-sized company with a local or regional footprint that prioritizes building and re-investing in the communities where you live and work, then a smaller community bank might be a better fit for you. Most community banks can either manage all needs for capital lending you might require or will cooperate with other similarly sized local banks to provide the services you need.
Most businesses are better off being a big fish in a smaller pond. You’ll get more personal attention and a stronger commitment to understanding your overall needs. Perhaps a good rule of thumb would be to roughly match your personal or corporate finances to the size of the bank’s finances.
2. Man versus machine.
How important is it for you to know the banker you’re dealing with?
National banks will have a customer service representative who handles your loan application or account setup, but then usually hands your account over to a management company with an 800 number to call with questions. If your finances run on autopilot and don’t need much tinkering or re-evaluation, then this might be the most efficient process. This scenario may provide a lower rate.
Many businesses — and individuals, for that matter — may need to refinance loans, extend the terms, or renegotiate payments based on current conditions. A community bank may be more willing to work with your situation because they’re more familiar with your company and the community/clientele you serve. You will work with a local representative who is available to answer questions and explain options. If all your accounts and loans are serviced in one location, your local bank rep may even recognize potential issues before you do and point out opportunities to make the most of your assets and available capital in order to avoid problems down the road. It’s that proverbial personal touch.
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3.In-house or outside support.
How big is your team? Do you have an accountant, a financial advisor, a treasury consultant, a lending professional, a cash flow expert, and a trust officer on staff? If your company simply needs a place to deposit money and get loans without advice or consultation, then a big bank would work well for your needs.
The majority of businesses I work with prefer to bounce ideas off of me and our small business banking team. They sometimes come to us with an idea and don’t even know their options for making it happen. Many community banks provide consulting and advising to essentially serve as an extension to your finance department, letting you tap into specific expertise as needed. For example, our treasury management people can examine opportunities for improving cash flow or recommend ways to manage payables and receivables for maximum cost savings. Our trust officers can assist with succession planning and so on.
Determine the level of support you need and choose accordingly. Your bank should be a loyal and reliable partner at every stage.
4.Global versus local philosophy.
Some people and businesses don’t consider this in their partnerships, but if you do there is a difference.
Big banks choose global causes when investing back into the world of their customers, such as preventing malaria or improving worldwide access to clean water. Your business or personal causes may lean the same way.
Community banks focus on making an impact in the communities we serve. If you are locally minded with a commitment to making a difference in the lives of your family, friends, and neighbors, then a community bank would share those values.
5. Modern technology.
This last consideration is a trick question. With the development of online and mobile capabilities, most community banks are on par with the technology offered at big banks.
Finding a good fit is just as important to the bank as it is for the customer. Take the time to evaluate your own needs and find a bank that fits your size, philosophy, and personality. If you’d like more information about community banks, visit the Independent Community Bankers of America.
One of this year’s In Business 40 Under 40, Paul Manchester is senior vice president-commercial banking at State Bank of Cross Plains (SBCP). He also leads SBCP’s Small Business Banking Team. In his spare time, Paul coaches the Mount Horeb High School JV basketball team and serves as assistant coach for the varsity basketball squad. Paul believes State Bank of Cross Plains’ community focus matches his own personal and professional goals to give back, to mentor, and to build relationships that really matter.
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