Banking is a funny thing. With every deposit we are actually putting our money in someone else’s hands and trusting that it will be there when we want or need it. We’re also giving that institution the power and ability to use our money while it is held on deposit.
What do you know about what your bank is doing with your money?
Business owners often choose to open bank accounts at places that are physically close to us (convenient) or where we have banked previously (known). After all, if you’re going to trust your hard earned money to someone it should be an organization or institution that is secure and dependable. But in the age of electronic banking, proximity is not always the best indicator of convenience. And size is certainly not a guarantee of safety or security. So, when I think about choosing a bank, I’m primarily concerned with three additional factors:
- Cost/fee structure
- Online access and functionality
- Alignment with my social values and personal priorities
For many people the convenience and security equation leads them to choose one of the country’s biggest banks: after all they are are practically everywhere (convenient) and dominate that marketing landscape (well known; I mean, doesn’t everyone bank there?)
But big banks are not necessarily trustworthy (cough, cough, Wells Fargo).
Nor are they the most in tune with the needs of small business owners.
There are literally hundreds of banking options available to you depending on where you live and assuming you have reliable internet access for online banking. There is even a website devoted to helping you find a bank that matches your needs and interests. It’s called Find A Better Bank. The website is tailored to consumer/personal banking but you can also use it to find a short list of banks to research further for your business banking needs. But how do you know what you’re looking for?
The banks I recommend fall into three major categories: Independent Community Banks, Social Impact Banks and Community Development Banks or Credit Unions. To understand all the options available to you, here’s an overview of each type of bank to consider. Each type of bank also has an industry website you can use to search for banks that serve your needs.
1. Independent Community and Regional Banks
About 80% of small business loans are originated by regional banks. This is because regional banks are still in the business of building relationships. They are more likely to actually get to know you and your banking needs; and may possibly be more flexible about things like monthly fees and how they evaluate your loan application. Where to find them? Look on the main street of your town or local shopping area. Or check out the members of the Independent Community Bank Association
2. Social Impact Banks
Some banks include a social impact mission in their business structure and core operations. To be sure this is a solid commitment (not just “greenwashing”) you can rely on institutions that are certified B Corporations. B Corp members meet the highest standards of verified, overall social and environmental performance, public transparency, and legal accountability. To find a bank that meets this standard, Go to the B Corp website, under Find A B Corp and put the word Bank into the search bar. You’ll get a list of banks that are B Corp members. Seven of the current listings are based in the US (two of those are based in NYC.) All will open online accounts that give you full access, even if you’re not based in the same city or state. If you need international banking check out The Global Alliance for Banking on Values, an independent network of banks using finance to deliver sustainable economic, social and environmental development. The Global Alliance for Banking on values posts member information on a global map (most of these banks active in the United States are also B Corps.)
3. Community Development Credit Unions or Banks
These are specific banks and credit unions that are dedicated to providing financial services to underserved and under-banked communities. If you are lucky enough to have one in your town or neighborhood you’ll find they are a great way to know your money will be used to support your neighbors. Plus, because they are small and geographically focused, you’ll have the benefit of building strong personal relationships with your banker. To find opportunities in your town/city check these lists:
- Community Development Bank Association: Community development banks are community banks committed to helping the underserved. All community development banks (and credit unions) are certified as Community Development Financial Institutions by the U.S. Treasury, a designation which affirms their focus on mission.
- National Federation of Community Development Credit Union: Credit Unions are unique because they are structured as cooperatives that are owned by their members. Community Development Credit Unions generally serve specific geographic areas; individuals or business members are required to have some relationship to that area to be eligible to join. Credit Unions are also non-profit and tax exempt. Community Development Credit Unions have fair priced services as part of their core mission. If you’re looking for lower-cost banking services and care about financial opportunity for community members, a Community Development Credit Union could be the right match for your banking.
When you compare these options to the large commercial banks you can expect to find:
- Lower fees
- Lower minimum balance requirements
- Fewer add-on services, and
- More flexible underwriting
The catch? Some of these banks could be considered somewhat higher risk than large commercial banks. However, with deposits insured by the FDIC or another regulator, risk is not a big factor for deposit accounts under $100,000. If your bank balances are generally at or over $100,000 then you’ll want to add risk analysis to your consideration of banks along with price, convenience and social impact. Also consider keeping some of your funds (such as profit reserves) at a second institution.
Maybe shopping for a new bank sounds like a lot of work -- but remember it’s YOUR money; and it’s up to you to be sure that your money is being used to build the world you want to live in (and leave to future generations).
Click here to download a spreadsheet you can use as a template for comparing different banks that serve your community -- It’s filled in with information from several New York City options which you may find helpful in your comparison shopping.