NATION – New small companies have a long to-do list and one of the items includes selecting a bank from the large collection of institutions vying for the finances. Successful small-business owners develop close relationships with local financial institutions. Companies must select a bank to meet the specific needs of the firm and the changing needs of doing business. Shopping for a business-bank partnership typically involves a choice of community and commercial banking operations.
Commercial banks offering national banking operations must meet federal laws regulating inter-state banking. The history of commercial banks involves a separation of commercial and investment banks. The bank failures during the Great Depression created a series of bank reorganizations, notably the Glass-Steagall Act of 1933. These controls over commercial banks continue today, although the regulations loosened beginning in the 1990s. Commercial banks focus on income production for shareholders and owners. Small businesses using commercial banks have a variety of banking products and services, but they also face investment risks.
Community banks feature the stand-alone village bank and small bank chains chartered under state laws. Some community institutions join statewide voluntary organizations to promote local banks. Many banks started operations to keep local cash safe and loan money to small businesses and local farmers. Community banks frequently focus on lending money for mortgages for community housing. The institutions follow state banking laws regulating the bank charters.
Commercial banks have the cash reserves to make larger business loans and the capacity for greater risk in making the loans. Large chains typically offer longer banking hours, including weekends, and also have night-drop services for depositing cash after business hours. Commercial banks also provide small-business owners a variety of credit cards options and checking accounts specifically designed for small companies.
Community banks frequently operate under legal restrictions to avoid investments that put your business money at risk. Small, local banks also understand the historical importance of business to the community and work to extend credit to companies with a long history of local operations. Although some large national banks advertise to attract small-business accounts, commercial banks generally have less focus on local community development and more restrictions on small-business loans. Commercial banks typically have less flexibility to work with small companies and narrower ranges of services for small-business owners compared with the service the bank provides to large corporate account holders.
Community banks have less cash reserves to make business loans. Many community financial organizations focus on home-mortgage and small-personal loans. Community banks also lack more complex investment products for companies paying for benefits and offering employee retirement accounts. These limitations restrict the range of retirement accounts compared with programs offered by large commercial banks.
