Small business owners tend to stay loyal to their bank.
For some, that allegiance is down to loyalty: 40% of business owners say their bank values their business, and 30% believe they’re treated better than the average customer, according to JD Power’s 2021 study of satisfaction with small business banking in the United States.
In other cases, it is due to inertia. On average, 14% of small business owners plan to switch commercial banks in any given year, but only about 7% actually do so, according to data collected by JD Power from 2018 to 2021.
“They may complain about their bank, but they’re just like, ‘Well, they’re all the same,'” says Carolyn Katz, business consultant and certified mentor with SCORE, a national volunteer organization that provides free mentorship to companies.
Sticking to a business account that isn’t right for your business can hurt your bottom line. Excessive fees, restrictive limits and insufficient trading products can reduce profits and hinder business growth. And all are clues that it’s time to shop around for a business bank account.
When to switch business bank accounts
1. You exceed your limits
Exceeding transaction and cash deposit limits is a good sign that your business has exceeded its business checking account. While it’s tempting to just upgrade to the next level of account offered by your bank, now is a good time to explore your options and compare other banks’ limits, fees, and services. More on that below.
2. You are hit with excessive charges or surprises
Although some fees are expected, fees for overdrafts, wire transfers and use of ATMs vary from bank to bank.
Some business accounts charge $35 or more for overdrafts, for example, while others charge $25 or less — and some don’t charge overdrafts at all. Compare fees from local banks, credit unions, and online banks to find a best fit for your business.
3. You can’t get a business loan
If your primary bank denies you a Business loan, explore other options. Smaller banks, credit unions, and community development financial institutions often have more flexible lending standards than larger banks.
At smaller banks, for example, 66% of applicants were approved for at least one funding in 2021, compared to 48% of those who applied for funding from a large bank, according to the Federal Reserve’s annual survey of small business credit.
Applicants from smaller banks were also less likely to report difficulties related to the application process, funding timeframe, interest rates and repayment terms.
4. You need additional commercial products
At some point, your business may need merchant services, payroll support, or business credit card. While your bank may offer these products, it’s a good idea to research the rates, fees, and features of other banks and service providers.
A business card with a long introductory rate period of 0%, for example, can help your business finance small purchases and avoid rising interest rates (provided you pay off purchases before the end). of the promotional period).
5. You experience poor customer service
No bank is 100% free of problems and errors; the key is how your bank handles them.
Does it take multiple calls, emails or visits to resolve a problem? Are you getting conflicting answers to the same question? Are you having trouble finding someone to talk to?
“The account I closed first when I had my own business was one where I just couldn’t talk to a human ever,” Katz says. “If I called them, when I walked into my local branch, they couldn’t find my information; they didn’t know what was going on.
Another red flag is a service that doesn’t fit your hours or style. A bank that handles all customer queries via email might work for an e-commerce business, but it’s less than ideal for a truck driver.
How to change business account
You don’t need to make a quick, clean break from your current merchant bank, says Katz.
“It’s not like breaking up with your boyfriend. You don’t have to quit everything in one day,” says Katz. “Take some money, put it in a new account, start using it more, and give the other account time to age.”
You can also keep your current account if it works for you in some way (but be aware of potential monthly fees). Maybe your bank offers the most competitive terms for small business loans, for example, but you open a new account elsewhere to take advantage of a free business checking account or a business credit card with stellar rewards. Different banks have different strengths, after all.
If you choose to change your primary business bank account, use a “change kit” to make sure everything is in order. These checklists offer helpful reminders, like changing recurring payments and notifying your accountant. Many banks offer these kits to help new customers transition, but you can find one online if your bank of choice doesn’t.