How to assess your bank

In a recent SmallBusiness.co.uk poll, 65 per cent of small business owners were shown to be dissatisfied with the service they were getting from their business bank, with answers ranging from ‘It’s pretty inadequate’ to ‘It’s terrible’. SmallBusiness.co.uk and banking consultancy Lochroe point to this list of key issues to consider when assessing your business bank.

It is worth stating at the outset that banks are businesses and exist to generate returns for their shareholders. You can therefore expect to pay a price for the services and borrowing facilities provided.

There are, however, certain key elements to consider when evaluating the your current bank and measuring this against others. SmallBusiness.co.uk and banking consultancy Lochroe point to a list of key considerations:

1. Cost vs. Service

draw up a list of your requirements before evaluating banks. Ask:
– What do you get for your money and does ‘free banking’ really mean free?
– Do you get a face-to-face contact and do you need one?
– How does the bank meet your requirements for transactional business?
– Is it worth paying more to obtain more bespoke funding?

2. Is bank funding the best source of money for your situation?

There are a large number of specialist funders who provide support in areas where the high street banks appear more risk averse.

The number of alternative funding solutions has mushroomed in recent years as bank credit policies tighten. It’s important to research these sources before chosing one route over another.

Alternative sources of funding may suit your business: consider family funds, external equity, asset finance, invoice and trade finance, equipment leasing, stock finance and payroll finance.

3. How many businesses does your bank manager look after?

This is an often-overlooked question. Some smaller banks have experienced managers working with 100 businesses or less. Some high street banks have managers working with several hundred businesses and many use call centre facilities. You can bank directly and very cheaply using the internet if you have straightforward requirements. Try to ascertain which solution suits you best.

4. Does your bank manager understand your business?

A good bank manager will spend time getting to understand your business. You should be able to make contact as frequently as you require and each contact should add something to your business. They should even be able to make valuable business introductions on your behalf.

5. Is my bank offering the right lending vs. security?

Unsecured borrowing for businesses has become increasingly hard to find. Director’s Guarantees often cause concern for the business owner but are pretty much unavoidable for limited companies.

It is often worth evaluating what other banks can offer before agreeing to give security for debt. If the funding has been structured properly then the requirement for security might be avoided or diminished.

‘The main high street banks are now seeking the same types of business and offer relatively standard support packages despite claims of differentiation,’ says Lochroe.

‘The process of choosing the right bank is a very individual one for a business owner, ultimately judged on an balanced evaluation of relationship, pricing and service.’

Adam Wayland

Adam Wayland

Adam was Editor of SmallBusiness.co.uk from 2006 to 2008 and prior to that was staff writer on sister publication BusinessXL Magazine.

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Banking

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