By Kyla Hansen, CPA
Your bank should be an asset, never a hindrance. If yours is holding you back, don’t feel trapped—consider shopping around. Here are five signs it could be time to say goodbye.
Your loan covenants are too restrictive.
When a business fails its covenant, nine out of 10 times the bank will waive it with little difficulty, but this can create some level of difficulty on your end. Covenants are very common and necessary in many situations; however, if a bank isn’t familiar with a client’s situation, it may inadvertently set covenants higher than they need to be. If you’re having to repeatedly request waiver letters, it may be time for a switch.
Your banker is consistently MIA.
Good communication is critical to any relationship, and especially to the one between you and your bank. At a minimum, your banker should contact you quarterly to see how your year is going. Of course, communication is a two-way street, but if your banker rarely checks in or doesn’t return your calls, ask yourself: Could I get better service elsewhere?
You don’t have a relationship manager.
On a similar note, dealing with different banker every time you interact with your bank is not ideal. Working with a banker who is comfortable and familiar with your business can prevent headaches, especially if your business is unique or seasonal.
You’ve outgrown it.
Federal lending restrictions and limitations are generally based on a bank’s size. If your needs have exceeded your bank’s lending capabilities, it’s possible you could benefit from a larger establishment. Keep in mind that some banks will augment their lending power by offering an SBA loan. This approach gets part of the loan off of the bank’s coverage, but it can create additional fees and expenses for you. In some situations, however, an SBA loan will be the best fit for your business needs. If your bank suggests an SBA loan, make sure it’s the best option for you.
They are behind the times.
Your bank should be able to support you with resources such as remote deposit, company credit cards and even fraud protection features such as Positive Pay. Having access to these not only creates efficiencies but also provides additional controls. If your bank is lacking in this area, you may be better served elsewhere.
Do your research before breaking up.
Moving your business to another bank should never be done on a whim. Think about the pros and cons. For instance, Bank ABC might have a higher lending capacity, but will moving expose you to pre-payment penalties at Bank XYZ?
Also, if you’re not happy with your bank, say so. Many business owners don’t realize it, but loan covenants are not set in stone—they can be negotiated. The banking industry is highly competitive, and many banks are willing to work with you, whether by offering a lower rate or additional services, to keep your business.
Confer with your accountant.
Should you stay or should you go? Talk to your accountant before you make the call. He or she can help you identify pros and cons of switching and compare rates of other establishments. At JAK, we’ve helped several clients determine whether or not to end a banking relationship by running numbers and sharing our perspective.
When it comes to business banking, it’s important to know your options. And to make sure they are truly working for you. If you do need to make a change, know that we have strong relationships with many bankers, and can easily recommend a banker who we feel is a good match for you.