Picking a small business banking account can be like eating at a buffet. There is something for everyone but it is hard to tell which offerings are the best for you given that they are so diverse. The issue is compounded by the fact that small business banking is not like personal banking. A small business typically requires a lot more services than personal banking and there should be, from the customers’ perspective at least, there should be a balance between paying the lowest small business banking fees and deriving value.

I have used 5 different banks and 1 credit union for small business banking. As a lawyer, I have dealt with all the major banks on either transactions or written nasty letters on behalf of clients to these same institutions. From all these experiences I would make the following observations about picking the right small business bank account.

Not all small business bank accounts are built the same; every bank has a niche. As one of the comments in Million Dollar Journey’s  linked post noted, every bank has a professionals division (banking for doctors, dentists, accountants, lawyers etc. etc.) or some type of niche they serve. The plans for these types of industries are different than other businesses. Lawyers, for example, need to have no holds trust accounts (for example, a real estate lawyer has to be able to deposit mortgage funds in trust for a purchaser and then immediately pay it out to the vendor soon after deposit).

Some banks are great at servicing these types of industries (Scotiabank is traditionally the leader for servicing doctors and dentists; RBC is very active in this same industry). Others have a particular niche; TD is still my favorite for banking on-line. HSBC is a very good bank if you have business internationally (there is an extremely long hold period if a USD cheque is deposited from a non US bank; HSBC has a plan that avoids this issue). The key is to ask around and see who does what well because…

You need a good account manager. Forget purely a narrow focus on fees. Ask instead what someone is going to do for you for those fees. Most entry-level tellers have limited clearance; for example, most cannot process a deposit  over $500 without a supervisor signing off. This is not a large deposit for a business.  In other words, the person you see on the other side of the counter has limited authority to solve your problems.

A good account manager can authorize deposits with typos on them, release holds, transfer money from one account to another (with your authorization) if your account goes into the negative, waive fees (yes, it happens if you ask nicely), shift you from one fee schedule to another periodically and refer you clients (if you tell them what you want). I have requested or experienced every one of the above. The key is to maintain the relationship. Since an account manager’s compensation is partially based on their book of business, they have a vested interest in seeing you succeed as well.

Branches actually make a difference. There is a particular branch from a particular bank that consistently dropped the ball on client transactions: great bank, bad branch. Years later, I met an entrepreneur for the first time who complained about their bank. Sure enough, it was that same branch! Your analysis should not stop at the institution but the branch you are using.

My personal experience is avoid a large branch unless you have huge accounts. You are just another number and you are probably pretty far down in the pecking order of your account manager. Co-ordination is also an issue; right hand often does not know what left hand is doing in large branches. Avoid the small branches or credit unions with overwhelmingly personal accounts.  Small branches or these type of credit unions are not use to larger deposits, frequent deposits and withdrawals (they think you are kiting because they don’t understand cash flow of businesses) and what small business needs from their financial institution.

As a side-note about credit unions, they are good alternative to the traditional banks but not all credit unions are built alike. For smaller to modest sized accounts, they can be good choices but some credit unions are not built to service the small business account.

Picking the right branch comes down to word of mouth. Who are your neighboring businesses using? As everyone knows, there always 2-3 banks at every major intersection. But, if a large number of people are using the same bank and have nice things to say about it, it means that branch is doing something right.

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Obviously, there will be certain small businesses that do nothing more than a few deposits and a few withdrawls each month. In this context, a focus on minimizing fees is warranted. But, for those requiring other banking needs, I would focus on the above in picking your small business bank account.