Banks are one of the most important partners a small business has. The many functions that banks serve help companies pay their bills, receive payments, transfer funds, obtain credit and loans, set up and maintain investments, and manage their overall finances.
Of course, not any bank will do. The best business banking institutions understand your resources and needs, and works with you to achieve your goals based on those factors. Doing a little research to find a bank that offers what your business needs to succeed will pay dividends over the long run.
Banks Help Businesses Get Cash
The relationship between a bank and a borrower is naturally a closer relationship than that simply between a company and an investor who holds a bond. The two primary characteristics small businesses look for in a bank are:
A partner who is helpful and willing to work for your success
A supplier of services (checking account, savings, money market, lending, etc.) and competitive rates
When looking for competitive rates, the goal is always to minimize the weighted cost of capital (the weighted after-tax required rate of return on stock, both common and preferred, and debt).
Where you get funding from depends in large part upon where you are doing business. In can be said that companies who do business in places where banking plays a greater role may make greater use of debt financing, resulting in higher levels of financial leverage. Banks play an even more important funding role in countries that don’t have a functioning corporate bond market and where civil-law predominates more than common-law.
Small businesses that are starting up or expanding their business into regions or countries they are not intimately familiar with should do a little research about where funding is normally attained.
A True Partner
Best business banking practices suggest that it is in the banks’ interests to work with you to ensure your success. Your bank benefits (higher deposits, less risk of default on any loans, etc.) the more successful your business is.
Seek out the best business banking relationship by looking for a bank that offers the services your business needs, at competitive rates, as well as one that will be a supportive, long-term partner. Seeking out the most competitive rates is rather simple. Almost every bank displays online the services and products they can provide as well as the rates they offer. If you have any questions regarding specific products, give the bank a call or go in and talk to someone who can give you more information. Physically talking to a banker or bank representative will help you determine if they are going to be supportive throughout the partnership.