This is a critical decision that requires proper evaluation of your banking objectives and the state of your business.

Are you a…

• Startup Seeking Financing?
• Growing Business Looking to Expand Nationally?
• Business Looking to Manage Investments?
• Small Business Looking For Personalized Service?

Whichever state your business falls under, a 3-5 year financial projection should also be incorporated in your decision as choosing a bank should be based on your company’s needs today and well into the future. It would be a shame to develop a strong relationship with a banker only to leave for a different bank 3 years later.

So what are the advantages and disadvantages of choosing a community versus a regional or national bank.

Community Banks
Direct Access to seniors bankers is by far the greatest advantage that community banks offer over regional & national banks. Small business owners with deep local roots (i.e. local restaurant) will likely only have access to senior bankers in a community bank which could be the difference maker in obtaining a loan. Despite this benefit, local banking does come with costs (i.e. limited resources). A fast growing business may in the future wan to utilize more financial products which is generally limited at a community bank. Another factor to consider is that community banks have less capital to support themselves which maybe a concern given the recent credit crunch.

National Banks
Convenience is by far the greatest advantage of selecting a regional or national bank. A business with franchises across a region or the country or a growing business looking to expand their footprint would likely want to strongly consider a regional or national. Along with the convenience factor, regional & national banks also offer a variety of financial products (i.e. loan types) which may be attractive to a business looking for the most financial options. In addition, a business that uses multiple banking services (checking, savings, credit, investment, insurance) can often receive a premium on interest rate (1 to 2%) over the community banks. The major drawback of a national bank is that usually you receive less personalized service and often they will look purely at the numbers when doing an initial screening of a loan application.

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