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Small-business owners tend to stand by their bank.
For some, that allegiance is due to loyalty: 40% of business owners say their bank appreciates their business, and 30% feel they are treated better than the average customer, according to J.D. Power’s 2021 U.S. Small Business Banking Satisfaction Study.
In other cases, it’s due to inertia. On average, 14% of small-business owners plan to switch business banks in any given year, but only about 7% actually do so, according to data collected by J.D. Power from 2018 to 2021.
“They may complain about their bank, but they just sort of figure ‘Well, they’re all the same,’” says Carolyn Katz, a business advisor and certified mentor with SCORE, a national volunteer organization that offers free business mentorship.
Sticking with a business account that doesn’t suit your company can hurt your bottom line. Excessive fees, restrictive limits and insufficient business products can cut into profits and stall business growth. And all are cues that it’s time to shop around for a business bank account.
When to switch business bank accounts
1. You’re exceeding your limits
Exceeding transaction and cash deposit limits is a good sign your business has outgrown its business checking account. While it’s tempting to simply upgrade to the next account tier your bank offers, now is a good time to explore your options and compare limits, fees and services at other banks. More on that below.
2. You’re hit with excessive or surprise fees
While some fees are expected, charges for overdrafts, wire transfers and ATM usage vary from one bank to the next.
Some business accounts charge $35 or more for overdrafts, for example, while others charge $25 or less — and some don’t charge for overdrafts at all. Compare fees at local banks, credit unions and online banks to find a better fit for your business.
3. You can’t get a business loan
If your primary bank turns you down for a small-business loan, explore other options. Smaller banks, credit unions and community development financial institutions often have more flexible lending standards than large banks.
At small banks, for example, 66% of applicants were approved for at least some funding in 2021, compared with 48% of those who sought funding with a large bank, according to the Federal Reserve’s annual Small Business Credit Survey.
Applicants at small banks were also less likely to report challenges with the application process, funding time, interest rates and repayment terms.
4. You need additional business products
At some point, your business may need merchant services, payroll support or a business credit card. While your bank may offer these products, it’s smart to research rates, fees and features at other banks and service providers.
A business card with a long 0% intro annual percentage rate period, for example, can help your business finance small purchases and avoid rising interest rates (provided you pay off the purchases before the promotional period ends).
5. You experience bad customer service
No bank is 100% free of issues and errors; the key is how your bank handles them.
Does it take multiple calls, emails or visits to resolve an issue? Do you get conflicting answers to the same question? Do you struggle to even find someone to talk to?
“The account I closed first when I had my own business was the one where I just could never talk to a human being,” 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 service that doesn’t match your business hours or style. A bank that handles all customer questions via email might work for an e-commerce business, but it’s less than ideal for a truck driver.
How to change business accounts
You don’t need to make a clean, swift break from your current business bank, Katz says.
“It’s not like breaking up with your boyfriend. You don’t have to call it quits all in one day,” Katz says. “Take some money, put it into a new account, start using that more and give the other account some time to age out.”
You can also keep your current account if it works for you in certain ways (but be mindful of potential monthly fees). Maybe your bank offers the most competitive terms on 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 do opt to switch your main business bank account, use a “switch kit” to make sure you have everything in order. These checklists offer helpful reminders, like switching recurring payments and notifying your accountant. Several banks offer these kits to ease the transition for new customers, but you can find one online if your chosen bank does not.