October 23, 2012
Entrepreneurs are, by definition, a self-reliant bunch. It makes sense, of course. Those who forego a paycheck and traditional job security in furtherance of an unproven business model are unlikely to need much hand-holding.
Enter the banking relationship.
Of all the old-line professions going back to the days of feudalism, or even the Old Testament (banking, law, accounting), banking has done the most to modernize its interactions with customers. These efforts will soon render the bank branch a relic. But there are significant benefits for startups that go old-school and actually work with their banker one-on-one.
As you consider banking for your own business, think about:
- Size and Focus: Does your bank, or the person you are working with at your bank, actually want your business? Seems like a strange question, but the truth is that banks, and even different divisions within the same bank, focus on different market segments. You should find the bank, or group within your bank, that offers more than just free business checking. A smaller, local bank is more likely to assign a banking officer with more discretion to your startup than a large national bank that may not have much more to offer than a carousel of branch employees. Of course, the smaller a bank is, the (theoretically) fewer services it may be able to offer.
- SBA Lending: SBA lending is becoming much more popular, but not all banks choose to offer or are good at SBA lending. If an SBA loan is something you want to explore, you should determine if a bank actually offers this type of financing.
- Treasury Management: A true start-up probably won’t be a candidate for a loan or line of credit for several years. But, treasury services can be just as vital. This is especially true for startups heavy on sales and marketing people and light on CFO types. Banks can help startups to streamline payables and payroll processing, reconcile cash positions, speed customer collections, and make all of this operate seamlessly with a startup’s accounting software.
- Special Situations: Most importantly, your startup needs an actual person to turn to when something outside the norm needs to be done. If you have a personal relationship with your banker, then he or she will know how important a joint venture or large customer signing is for your company. So, when you call because you need that wire sent RIGHT NOW, it will get done. Similarly, when your startup can finally qualify for a line of credit, your banker’s recommendation, and your startup’s history with the bank, will be strong factors favoring approval.
Personal banking relationships may not seem important, but — as you can see — they can be vital for a startup as it grows and matures.
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