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What is the best bank for a start-up?

Is it better to go with a local bank, one that relies heavily on personal relationships but is only in a regional area? Or one of the big national banks that is set up for national (and international) banking but are much more impersonal?

Answers

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

My opinion is that if you are just starting out it is best to go with a local bank, establish those relationships. As the business grows then look into getting into a large bank.

Some regional banks that aren't nationwide can still do a lot of the same things the big banks can do, but it will require weighing what they can do with what you need, and their cost.

Local banks are more likely to work with you than large banks. If the business grows, you will have to move from a local bank. After all, a local bank may not have the assets to loan you $6M or more on a line of credit.

CFO Publishing published a great handbook called, "Small and Midsize Companies Think Big" I looked for it on the website, but I am thinking it came to me in an email as a promotional deal, because I cannot find it. See if you can, www.cfo.com is the website, look under Banking & Captial Markets as well as Credit & Capital under the Growth Companies option.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I would try to find a bank that wants you as a customer, not just a notch on the business relationship managers' belt. An extremely good banker is a rarity, a good banker is hard to fine, a bad banker is a dime a dozen.

Then look at what you need the bank to do. Do you need ACH/Wires/Electronic Feeds? Credit facilities, Letters of Credit, payroll cashing?

Lastly, look a fees. This can suck the life out of your cash flow very quickly.

Lastly, make sure the bank both understands your business model and industry niche; because when they don't you can forget about Credit and have headaches with the way you need to do banking. Ask if they have other clients in your market-space.

Now pick a bank that meets your needs.

Topic Expert
Paul Benedetto
Title: CFO, Director of Finance, Consultant
Company: Nextwave Software, Rethink Fabrics
(CFO, Director of Finance, Consultant, Nextwave Software, Rethink Fabrics) |

I agree with Wayne's comments definitely on fit. My general recommendation is that when you are starting out, a local community or regional bank is going to offer you much better service and have more flexibility to meet your needs. If you are looking for debt facilities, having local lending authority and the bankers knowing of your client base (if local) helps significantly.

You can always add another larger player bank to your mix, once you are further down the road and need more of the offerings that they can better provided (e.g. international transactions, letters of credit, more disbursed footprint for company office / operations, etc.).

If you are looking for an immediate loan structure and are not putting in equity, this remains a tough road for any startup, no matter what you may hear from the media and large bank PR campaigns. The old adage of "banks only want to lend to you when you don't need the money" applies. There are options though to deal with that aspect, but that is more of a different discussion topic. Happy to wade in further separately or offline.

Topic Expert
Simon Westbrook
Title: CFO
Company: Aargo Inc.
( CFO, Aargo Inc.) |

While banking decisions are made on the offerings of the respective banks, the problem is that actual service is delivered by mere humans. So many times I have been thinking what a wonderful relationship I have, and what great service flexibility, then the manager or account exec gets transferred, fired or promoted, and things change and you wonder whether to change banks.
Generally if you are looking for standard services and facilities at lowest cost I find the local branch of a national bank like Wells Fargo or B of A work best. If you have some un usual requirements then maybe their advantage of scale and standardized products doesn't help so much. And the regulated framework makes it hard to get any non standard deals done these days anyway!

Gary Honig
Title: President
Company: Creative Capital Associates Factoring Co..
LinkedIn Profile
(President, Creative Capital Associates Factoring Company) |

I would only add, business bankers who work within institutions tend to migrate around a lot. So while you may establish a relationship, that relationship might be with a different organization by the time you are looking for a loan. And business bankers do not hang around the retail level, you have to get an appointment upstairs to meet with one.

Depending on what industry you are in and your business model - if getting a conventional loan is in your future, one big incentive you have to offer when negotiating for a loan is to move all your banking activity if they approve you. Banks love to get your deposits action and that is a positive check on your application.

All this is to say your decision today might not be too important. Focus on banking fees as Wayne mentioned. I always suggest you ask around to your peers and see if they recommend someone.

Mark Hirsch
Title: CEO
Company: CreativeWorx
(CEO, CreativeWorx) |

As a serial entrepreneur, I've seen that start-ups have very similar needs: basic banking requirements and significant guidance and networking requirements. In my experience, two banks rise above the others given their participation in the start-up community: Silicon Valley Bank and Square1. I recommend both.

-Mark Hirsch
CEO, CreativeWorx

John Argo
Title: Consultant
Company: Independent Advisory Services
(Consultant, Independent Advisory Services) |

I've had good experience with Silicon Valley Bank and Comerica. The later was cheap, basic banking. Relationships can make a bit of a difference, although probably less than what bankers will tell you, if/when you need to take on debt. If you think you'll go after SBA-backed loans, go with someone who knows those. Depending on the business, it can be easy to outgrow a small regional bank but, I find, bigger banks can be unnecessarily expensive during the first few years.

Topic Expert
Joan Varrone
Title: CFO
Company: Cloud Cruiser
LinkedIn Profile
(CFO, Cloud Cruiser) |

Ditto on Comerica, Silicon Valley Bank and Square. However you did not tell you where you are located which will dictate which if any of these banks are right for you. All three focus on start ups and understand the issues faced as you grow and also have capabilities for online set up of wires and FX purchases.

One thing to watch out for with local banks is to make sure that you are dealing with the business to business banker and not just any banker as you want products that and service geared toward businesses and not individuals.

Ania Karwowska
Title: CEO
Company: www.HighSkillPro.com
(CEO, www.HighSkillPro.com) |

For small businesses, especially if you are unsure of your cashflows and minimum balances on the account, the banks with the most friendly approach and fees much lower than large banks are (in no particular order): Silicon Valley Bank, Square 1 Bank, and Simple bank. I suggest give each of them a call, introduce yourself, ask for standard overview, and request a fee list for all possible types of transactions. This will allow you to easily compare your options and make a more informed decision.

Ania

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