Choosing a Banking Partner is More Than Just Points

You really need to be either a very heavy sleeper or dead to not see how eager the capital markets are to place capital in the hands of entrepreneurs these days. Banks are also joining into the fray but there is more to this than just loans. Banks need to be viewed as strategic business partners. The WSJ recently had a great piece that explains some of this (subscription needed) but here is my perspective.

When selecting a banking partner, I suggest evaluating them using the following criteria:

1. Access to capital: can they get you loan availability and can you access it according to your business needs. Getting a $3 million loan but only getting to borrow $100K of it may not be what you need.
2. Treasury management: technology has enabled many smaller, regional banks to provide many of the same online and electronic banking options of the larger banks but look into this deeply. Your cash cycle is critical life blood to your business and any delays in processing can really hurt where it counts. Make sure you demand the same quality that you can get through your home banking portal.
3. Pricing: there is a bit of an art to this but how you structure your accounts, services and lines of credit affect your pricing more than you realize. Setting minimum balances at a level to accrue adequate earnings credits to offset you fees is key. There is more to bank costs than just interest rates.
4. Relationship: make sure that you like your loan officer and believe that he/she is an advocate for your business. You may have to kiss a lot of frogs to find the prince here but it cannot be undervalued. A good banker makes all the difference in the world. You want them by your side in good times and bad.

Weighting of each of these depends on you but this is a great start.

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