Choosing the Right Business Bank and Banker: A Guide for SME Owners

Running a small or medium-sized enterprise (SME) is filled with both challenges and opportunities, and one of the most critical decisions you'll make as an SME owner is selecting the right business bank and a skilled business banker. Your business bank should be more than just a place to park your funds; it should serve as a strategic partner that understands your unique needs and helps you achieve your financial goals. Your business banker, as the primary point of contact with the bank, plays a pivotal role in fostering this partnership.

In this article, we'll provide valuable insights and tips on how to find the ideal banking partner for your SME's specific needs. We'll also discuss the importance of selecting a bank known for supporting customers through various business cycles and finding a banker who genuinely cares about your business and you. Here are some key factors to consider when choosing a business bank and banker:

1. Industry Expertise

Each industry comes with its unique financial requirements, so it's essential to ensure that the bank and banker have the relevant experience and knowledge in your specific sector. Their understanding of your industry can help tailor financial solutions that best suit your needs.

Questions to Ask:

- Can you provide examples of other businesses in my industry that you have successfully supported?

- How well do you understand the unique financial challenges and opportunities in my sector?

2. Support through Business Cycles

Select a bank known for its commitment to supporting customers through different business cycles, including both prosperous and challenging times. Explore the bank's track record in assisting businesses during these phases and inquire about the flexibility of their financial solutions.

Questions to Ask:

- Can you share examples of how your bank has supported businesses during economic downturns or industry-specific challenges?

- What types of financial solutions do you offer to help businesses navigate through different phases of the business cycle?

3. Credit Risk Appetite

Different banks have varying levels of risk appetite for various industries. It's essential to choose a bank that is comfortable with the risk profile of your business. A bank that understands and supports your industry's growth potential is more likely to provide favourable terms, especially for loans.

Questions to Ask:

- How do you assess credit risk in my industry, especially for loan applications?

- Can you provide insights into the credit options available for businesses within my sector?

4. Total Cost Per Annum (Fees and Interest Rates)

Understanding the total cost of banking with a particular institution is crucial. This includes fees for services, interest rates on loans, and other hidden costs. Make sure you have a clear understanding of the cost structure.

Questions to Ask:

- What are the fees associated with maintaining a business account with your bank and obtaining loans?

- What are your current interest rates for loans, and how can we manage these costs effectively?

5. Communication and Accessibility

Your business banker should be accessible and responsive. Effective communication is essential for resolving issues, obtaining advice, and making informed decisions about your finances.

Questions to Ask:

- How can I reach you in case of urgent matters?

- What is your typical response time for client inquiries or concerns?

6. Online Banking Platform

In today's digital age, a robust online banking platform is crucial. The online platform should be more than just a basic tool; it should offer a comprehensive solution that can be a one-stop shop for various financial needs, including foreign exchange (FX) hedging, payments, and reporting.

Questions to Ask:

- Does your online banking platform offer integrated FX hedging solutions?

- Can I manage payments and access reporting seamlessly through your online platform?

7. A Banker Who Cares

A genuine and caring banker can make a world of difference for your business. Look for a banker who is not only focused on the financial aspects but also cares about the success and well-being of your business and you as a business owner.

Questions to Ask:

- How do you prioritise the success and satisfaction of your clients?

- Can you share examples of how you've gone the extra mile to support businesses like mine?

Tailoring Your Decision to Your Industry

It's important to note that the factors mentioned above can vary in importance depending on your specific industry and business needs. Your industry and requirements will guide your priorities when selecting a bank and banker. Take the time to evaluate your unique needs and find a banking partner that aligns with them.

Tip: Obtaining the Best Quote from Your Bank

When discussing loan terms or other financial arrangements with your bank, it's essential to ask for the best possible quote. You can enhance your negotiation position by offering the bank a "share of wallet." This means that you're willing to consolidate your transaction banking and lending with the bank, not only for your business but also for the personal finances of the directors. By bundling these services, you become a more attractive customer to the bank, and they may be more inclined to provide you with a favourable quote on loans and other financial services. Don't hesitate to discuss this possibility with your business banker to potentially secure more advantageous terms.

In Conclusion

Selecting the right business bank and banker is a pivotal decision for SME owners. By considering industry expertise, support through business cycles, credit risk appetite, total cost, communication, and the capabilities of the online banking platform, you can make an informed choice that will positively impact your business's financial success. Remember to ask the right questions.