Community Bank vs Big bank - Which is Best for Your Business?

Banking services are a commodity. Everyone offers the same products. Choosing banking services should be based on price only. The Community Bank today may be owned and operated by a National Financial institution tomorrow. At different times, different banks offer extremely competitive pricing to promote new accounts. Look for those deals or feel free to go to your bank and say, "Your competitor down the road is offering this product at this price. Can you match or do I need to move accounts?"

Not everyone offers the same service, the same responsiveness, the same underwriting, the same understanding of your banking needs. Move around a lot with banks and they will not be loyal to you when you need that line of credit or loan.

Our business as locations in four states and we need sophisticated cash management products. As a result Big Banks were the only ones able to meet our requirements. In addition, the size of our line of credit eliminates many community banks from consideration regardless of other factors.

There are numerous considerations one needs to take into consideration…just a few are: do you have international banking needs; do you need to have a close proximity to a branch; will you outgrow them in the near future; and do you want to be a little fish in a big pond or a big fish in a little pond? Every business has their own set of requirements that needs to be addressed.

This question hits home to me. Our fees have always been pretty high. I trust the bank and the relationship and that is what has kept us loyal to them. But this last month they doubled. We could pay someone's mortgage payment with the fees we pay every month. It seems really excessive to me. We meet about it twice a year and they explain the structure but in shopping banks before I have had banks tell me they have $0.00 fees if you keep a minimum balance in the account. When I am paying what I am paying and here free I get excited but nervous. How can one bank charge me a ridiculous amount each month and another justify no charges at all? With the banking industry in the shape it has been in the past several years I want to make sure I don't make a poor decision to run from my current relationship. Any thoughts?

After a few decades of providing corporate financing, I am confident that everyone’s money is green. But, financial services providers have vastly different profitability, reputations, perceived performance levels and enterprise values. There must be other influences at work.

Banking and financing, as the second respondent accurately observed, involve more than just handing over a bundle of money. Thus, it does not necessarily follow that all banking service delivery is equivalent (I have seen numerous examples) or that price is the only relevant consideration in choosing a source. In my experience, buying decisions made solely on price are often unsatisfying - for both parties – unless there are no other potential sources of value in a transaction or relationship.

At the same time, paying more in an attempt to assure future loyalty from an organization may be unwise. Loyalty rests with individuals, not with organizations and, even so, is far from guaranteed when you need it.

The operative distinction isn’t between community and big banks as your question suggests. The banks you consider must offer the products and services you need now or expect to need soon. Also choose people you are comfortable working with and with whom there can be mutual forthrightness and honesty. These individuals will have a clear willingness and ability to understand, articulate and get appropriate internal consideration of your company’s needs (or tell you promptly when there is a lack of interest or capability). They will take responsibility for the relationship with your firm even if they lack personal authority to approve and deliver everything requested.

Organizational interests, strengths, funding costs and capabilities differ and also change over time. Even if your company is small, I recommend establishing relationships with two or three providers [Christie, is this feasible for you?]. Treat each professionally and replace those that don’t treat you and your firm likewise or repeatedly fail to deliver. That will promote competitive offerings. Don’t be penurious or make every request strictly a “best price” competition; you’ll soon get the commodity service level you deserve.

As others have stated, price is one of several considerations in choosing a bank. When selecting a bank, see how well the banker understands and can address your needs. If you have a great relationship with a bank and the only concern is banking fees, you can look to a firm like the Montauk Group to reduce your fees - http://www.themontaukgroup.com/.

Jim Schwartz and Anand Goel are on point about relationships. I have always done business with a banker, not a bank. If the banker moved, so did my business.

Beyond that, I have found that big banks do the big things well, but have difficulty with the flexibility to do the small things well. So for international transactions, I might maintain accounts with a big bank, but for localized financial support, I relied on smaller banks.