Banks tout everything from free checking and online services to special credit-score-based lines of credit in hopes of attracting small-business owners to bank with them.
But which offers are best, and how should small-business owners choose between them?
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There’s no set answer – and things get more complicated when in addition to competing checking and savings accounts, banks try to win over customers with other services.
For example, Bank of America, Rhode Island’s largest financial services provider, promotes its credit card merchant services. Mario Ruggiero, the bank’s senior vice president of Northeast business development, said they’re so good that if a customer finds a better rate for credit card machines and transactions, the bank will give him $50.
“That’s how confident we are in our merchant services,” Ruggiero said, adding that because Bank of America owns its own merchant network, it also guarantees funds from credit card transactions will go directly into the business owner’s account the next day.
Citizens Bank also owns its merchant network and offers next-day turnaround, said Tony Nuzzo, the bank’s managing director of business banking for New England. And Citizens has one high-profile distinction: It’s Rhode Island’s top U.S. Small Business Administration lender – a reflection, Nuzzo said, of the bank’s “commitment to helping small businesses grow.”
Bank of America, which is not in the top three for SBA loans, sets itself apart in other ways. Its lines of credit only require businesses to be 30 days old, Ruggiero said, whereas most banks require six months. Approval is based on the owner’s personal credit score.
Webster Bank also offers a non-secure line of credit based on credit scores, said Brenda Farrell, assistant vice president of public affairs for this market. The service gives Webster a competitive edge, she said, because small businesses can acquire a credit line up to $100,000 without submitting financial statements, which speeds the process.
Sovereign Bank tries to stand out in lending as well. Though the bank is based in Pennsylvania, Frank Casale, senior vice president for Rhode Island business banking, said all decision-making for loans of more than $250,000 is done locally, so businesses get answers more quickly.
Douglas Jobling, interim director of the R.I. Small Business Development Center, said small-business owners should consider opening business checking, savings and lines of credit with the bank that handles their personal accounts – that can get them better consideration for loans and other services, Jobling said. The center provides training and free financial consulting for small businesses.
Providence-based Bank Rhode Island, which defines itself as a business bank, first and foremost, and only started in 1996, steers customers in a different direction, encouraging them to switch to get a bank better suited to their needs. It even has a special “switch service” to walk a business customer through the entire process.
BankRI also provides free checking for the first three to six months to offset startup costs for its small-business customers, said Kathleen Orovitz, director of retail banking. And BankRI rewards longtime customers with 4.1-percent yields on a special money market account.
But business customers’ loyalty to their banks can be hard to break through.
Big Fish owner John Elkhay, a Citizens Bank customer, said he won’t switch to another bank because he feels no savings is worth giving up his banking relationship. The Providence restaurateur also said Citizens is convenient, because it has a branch close to his bookkeeper’s home, which makes depositing more efficient.
Don Morash Jr., owner of Abbott Properties in Warwick, has been with the same bank for 30 years – though the bank itself has changed. Morash started his business accounts with Industrial National Bank, which turned into Fleet, which turned into Bank of America.
Morash said he’s happy with Bank of America because it has branches all over the country, which is good for Morash since he travels a lot. But Morash said smaller banks and credit unions are also good for the personal attention they provide, though he wouldn’t switch.
“Once you’re with a lender or a bank and you’re happy with them, there’s really no point in moving around,” he said, adding that even if someone switched to get a better deal, they would probably end up paying for the deal in some other way. “It all averages out in the end.”
