Pros and Cons of Multiple Banking Relationships
Like most successful family business owners, you probably hear at least occasionally from a banker who tries to persuade you to move your banking business to his or her institution. You and your company may already have relationships with two or more banks. For example, you may have personal accounts at one institution and business accounts at another or a loan and checking account with one bank and a CD at another. There are pros and cons to maintaining these multiple banking relationships that you should consider.
Advantages of Multiple Banking Relationships
Multiple banking relationships can be very beneficial, especially if you find quality service providers at more than one institution. The primary benefit you can realize from more than one banking relationship is ensuring that you receive competitive pricing and terms for each of the product types offered. Contact with more than one banker can provide you with important market information regarding pricing, terms and service.
Another advantage is that a fresh look at your business can often mean new ideas. Someone learning about your business for the first time starts with a clean mental slate and can often present ideas that you and your current banker may have overlooked. These ideas may represent cost savings or growth opportunities for your business.
Disadvantages of Multiple Banking Relationships
Multiple banking relationships also have their disadvantages. Multiple products and services purchased from a single institution can often be obtained at a lower overall cost than if the same products and services are purchased from multiple providers. This is true because it is much less costly to a bank in terms of employee productivity to sell an additional product to an existing customer than to obtain a new customer.
For better or worse, all business relationships entail a personal aspect in addition to business. Business relationships, like personal relationships, take time and energy if they are to work well. Maintaining multiple quality banking relationships may take more time than you have to give.
Some Factors You Should Consider
The following is a list of some factors for consideration of whether a single or multiple bank relationship is right for you and your company:
- Is your company a heavy user of bank products and services? If so, you may be able to obtain lower overall cost by maintaining all of your banking business with one institution.
- Does your bank offer all of the products and services you require? If not, multiple or even entirely different banking relationships may be a necessity.
- Is your banker well liked and respected within his or her own organization? If not, you may want to keep your options open.
- Are bank products and services important enough to your company to warrant devoting the necessary time and effort to maintaining multiple relationships?
As is probably the case with many of your company’s other vendors, people tend to make the real difference when it comes to providing quality products and services at competitive prices. The ideal situation is to find a responsive bank and banker whom you can trust to provide you with competitive products, service and pricing. While there is no simple answer, consider some of the factors presented herein should help you find the right level of banking service for your company.