What Small Business Owners Need to Know About Banking

For a small business owner, banking can often be an afterthought – a mere conduit for necessary business activities like making deposits and meeting payroll. But a good banker, and more specifically, a good banking relationship, can have a positive impact on a small business and provide peace of mind for owners.

Here are a few things small business owners should think about when it comes to banking.

Understand your credit worthiness

One of the major reasons a small business owner approaches a bank is to secure capital for things like a major equipment purchase or a new location. But there are things a business owner needs to know before they walk into their banker’s office, particularly around credit worthiness, an assessment of the likelihood a borrower will be able to fulfill his or her debt obligations. If a small business is a partnership, the partners should talk about their individual credit situation. Small business owners should also engage their CPA to get an accurate picture of cash flow, one of the first things a banker will look at. Getting a better handle on credit worthiness can help make a small business owner’s meeting with a banker more productive by understanding their own capital picture ahead of time.

Cash flow management tools

Small businesses often operate on tight margins and cash flow issues, around things like payroll or major expenses, can be a major headache. Working with a banker to learn about available cash management tools – like remote deposit, which allows a business to make a deposit without leaving the office, and merchant processing, which allows them to collect payments right from the office –can give business owners a better understanding of how to manage cash on hand.

Banking needs change as a business grows

When small businesses get off the ground, they don’t typically have a lot of overhead – it’s often only one or two people, or family members working together. But as a business grows, banking needs change. For example, hiring more employees necessitates not only payroll changes, but also planning for benefits, as well as the retirement needs of employees. The type of banking products a small business needs may look very different in year five than it did in year one. A good banking relationship is flexible; it grows and evolves with the needs of a company.

Don’t look for a banker – seek out a relationship

This all leads to a final, overarching point: banking shouldn’t be just a bunch of transactions, but a relationship. Working with a banker who understands you and your business, where you are now and where you want to be in the future, is extremely important. Banking is an everyday part of a small business; don’t let it be an afterthought or something someone else handles. Seek out someone who will be an advocate for you and your business, someone who will be there to help you grow.

Krista Snyder is a senior vice president and small business banking manager for Bank of America.

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