Banks and Entrepreneurs
“I believe that banking institutions are more dangerous than standing armies”
- Thomas Jefferson
Thomas Jefferson certainly distrusted banks … as do many people still today. However, as an Entrepreneur, your Bank is going to become your greatest ally and your greatest standing army. Without a doubt, your bank accounts will become necessary and powerful tools that that are often taken for granted in an integrated economy.
As you plan your incorporation or LLC formation it is a good idea to research your options. The US is home to the most developed banking system in the world. We all know that the industry is slowly making its way into the future, somewhat behind other tech companies, but nevertheless moving forward with some degree of successful innovative ideas. As you read along, keep in mind that we are not associated, affiliated or in any way do we receive any compensation to talk about the companies and brands mentioned on this blog and website. We stick to our promise of providing independent services and ZERO unrelated upsales and gimmicks.
1. Large vs Small.
Large National Bank Associations such as Bank of America, Chase and Wells Fargo (to mention just a few) have the benefit of having branches all around the country. This is particularly handy if you travel a lot, if remote representatives or employees deposit checks for you, or if your clients make deposits directly at branches. The level of service tends to change by State, and even by City believe it or not, but if you need a large bank with a large offering of services then a National Association entity is the right fit for you. Most have standardized practices and fees for business services and accounts. An added feature is the ability to easily find bank ATM’s that won’t charge you fees on withdrawal. A disadvantage is that sometimes you may feel like a small fish in a big pond. Remember to always develop personal relationships anyway.
The US is also the land of community banking. There´s literally thousands of small banks that have one or just a handful of branches that also provide outstanding services. First Choice Bank in Chula Vista, CA comes to mind as a great example. A middle of the road option is also BBVA Compass Bank which has a few branches in the US, but is part of a gigantic international group from Spain with large presence in Latin America. The main feature of these banks is that you really get to develop a solid relationship with your banker. This comes in handy when you have specific needs, or when you a trying new strategies and products. In some cases they may have higher fees for some basic services that would otherwise be free or cheaper at larger institutions, so make sure you read the fine print and ask lots of questions. An obvious disadvantage is the lack of branches and the fact that locating ATM’s that are in your network may not always be easy. Some financial services may also be limited.
Regardless if you go Large or Small, always remember to build that relationship with not only you account manager, but also with your branch manager if possible.
2. Online Banks
Can I open a business account at an online bank? This is probably a question that we answer around 20 times per week mainly because there are several online banks, but not all of them offer business banking options. I think that a good source of confusion is Ally Bank, which has strongly positioned itself in personal banking but does not offer business accounts.
Great alternatives are Azlo, with a free checking account with no minimum balances but no physical checks - although it offers bill pay options. Axos Bank is also completely an online bank but it feels a bit more like a regular bank in that it supports checks, charges a fee if you don´t maintain a minimum daily balance. Finally, there`s Novo, the new kind on the block and is very similar to Azlo - free account and no minimum balance required.
I’m convinced that a good relationship with your bank is a pilar of your business. Online banks will certainly remain relevant if their customer services is not only good, it has to be outstanding and focused on solving problems almost in real time. Perhaps working with both a traditional bank and an online bank is the match made in heaven that we’ve been all waiting for.
3. Foreign Entrepreneurs
For many of our international clients banking questions and realities pose added challenges. For starters, you can rule out Online Banks in the US, as regulations only allow online banks to open accounts to US persons (citizens or permanent residents). There’s no way around it. This brings us to the next challenge, which is traditional banks must have the manager, member or director appear in person to open the account and process the paperwork. A bank manager once said to me that know your client regulations are fantastic and he enjoys having the client in person providing evidence of ID and “wet ink signature” in-person paperwork. So what may be an added requirement that could prove somewhat expensive in some instances, actually further protects the client and the banking system as whole.
Besides online banking though, you have the exact same options to choose from in large and small banking institutions.
If you are unable to initially appear in the US and open a bank account in person, some clients have mentioned a certain degree of success linking their Stripe account to process online orders with a service called borderless account provided by Transferwise. Keep in mind that this sort of services may be useful only to an extent as they do not provide an actual bank account and more importantly the deposits are not insured nor are they really intended to serve as bank accounts. A formal bank account with an actual US bank is the type of standing army that your project needs and deserves.
Bank wisely and use all the tools that your new bank makes available to you. Happy Banking!