The Right Time to Switch Banks
Your company’s banking relationship is an important one that needs to be cultivated and strengthened. Every small business should cultivate a banking relationship that will help grow the business. Although changing financial institutions can be a difficult and somewhat risky task, there are certain situations where it is appropriate to switch banks.
The first question to ask when considering switching banks is whether your business is receiving the appropriate service. For example some small regional banks may have loan or other financial programs that are more relevant for small businesses in their local area than some of the large national banks. If your bank continues to turn down your application for a loan or a credit line it may be an indication that it is time to take your business elsewhere.
In an attempt to bring in new business, many banks will provide you with material on how to evaluate banking services, which means that it is a subject that many banking clients are interested in. The following are some of the items that these financial institutions want you to consider when deciding whether you should switch banks.
- Is the bank in good financial health? Most banks will provide you with information on their financial statements. Look at the profit and loss information of any bank you are thinking of switching to. You may not want to move your business to an institution that is showing losses or that is too highly leveraged. Although most accounts are insured by the FDIC, it can take a considerable amount of time to get your funds returned after a bank has shut down.
- Can you get a loan or other credit? Loaning money is a bank’s bread and butter. They are usually more focused on clients that borrow money because they want o get repeat business. If your bank continues to deny your loan applications they are less likely to give you the best service as one that will extend your credit.
- Are the services worth the fees? Full service banks may be more expensive than others but their clients usually accept higher fees in order to have a personal banker or the other types of full service extras they receive. Determine the services that you need for your business and then decide whether the costs for those services are in line with other alternatives in the area. You should also look for warning signs. If the staff turns over quickly, it might be a sign that there are issues with the bank. Another warning sign are banks that are so understaffed that you can’t get someone to return your phone calls or sit down with you when you have a particular problem. If you have to speak with the corporate office instead of the local branch manager then it may be time to switch banks in order to get more personalized service.
- What are the bank’s strengths? If you require online or cell phone banking or one many of the other technological upgrade, you may want to switch banks to a larger institution that can provide the most current banking solutions. If local business knowledge is important than a smaller regional bank, that prides itself on being part of the local community, might be a better solution.
- Will the bank support you in tough times? Regardless of the banks strengths, the most important service it can provide is being your business partner when you find yourself with a business problem or in financial difficulty. If you had problem paying a loan and need a deferment or other help, are you secure that your current bank would work through your issues until you got back on your feet? Would your business be more important than immediately seizing the collateral for the loan? Does the bank have a track record in providing workouts with its clients or is it insensitive to the plight of its customers? These are some of the most important questions that must be answered before you can decide to switch banks.
Your businesses banking relationship can be as important as relationships with vendors or customers. What your business says about you can also be an important part of your businesses reputation or business credibility. This is especially true in recessionary periods or when the company is in financial difficulty. It is hard to determine how a bank will act in the tough times if you don’t ask specific questions in advance. Although you must believe that you are getting the best services for the money and that the bank will offer you credit when you need it, you may want to switch banks if you are insecure about it being your partner and having your business’ best interest in mind.
The information and advice provided by Dun & Bradstreet Credibility Corp. is provided "as-is." Dun & Bradstreet Credibility Corp. makes no representations or warranties, express or implied, with respect to such information and the results of the use of such information, including but not limited to implied warranty of merchantability and fitness for a particular purpose. Neither Dun & Bradstreet Credibility Corp. or any of its parents, subsidiaries, affiliates or their respective partners, officers, directors, employees or agents shall be held liable for any damages, whether direct, indirect, incidental, special or consequential, including but not limited to lost revenues or lost profits, arising from or in connection with a business's use or reliance on the information or advice offered by Dun & Bradstreet Credibility Corp.