On July 1, 2014 I started my own business, Mocko Consulting, Inc.
One of the first things I had to do, after signing the paper work in my lawyer’s office, was to open a business bank account. Before opening the bank account, I had to make a decision about which bank to use.
After receiving my MBA and learning that businesses often fail because they don’t understand cash flow, I realized it was important to find a bank that was willing to provide loans to small businesses. Even though I was nervous about starting my own business, I had to be consistent in my decision making process.
One of these days I might need a loan to grow my business or for working capital.
So, instead of following the recommendation of my lawyer to open a bank account with his bank, I decided to go ahead and research the subject of banks for small business.
I remembered I heard a great story at NPR about a website that ranked banks based on how friendly they were for small businesses. At the time I heard this report, I saved a link to the NPR story for future reference. My first step in the process of choosing a bank was to review this NPR article.
I wanted a bank that was FDIC insured, and that provided loans backed by the Small Business Administration (SBA). I started with a list of six banks in the region. The next step was the see how they were rated by banking grades.
At the time, Banking Grades ranking was based on small business loan balances divided by small businesses’ deposits, with information provided by the FDIC. After receiving some criticism from the banking community, Banking Grades improved their methodology. The new methodology uses the small business loan balances divided by the number of branches to calculate the ranking. Information about banks that are friendly for small businesses is available through this new website.
Of course, being a passionate Brazilian, I didn’t stop at Banking Grades. I decided to chase a few more bits of information, including how many years the bank was in business (thinking that the banks in businesses for a longer period of time were more reliable) and the risk rate of the bank as reported by Hoovers.
This was not a very extensive process, but it certainly gave me confidence in my decision. The bank I chose was initially ranked ‘B’ by Banking Grades old methodology. In the process of reviewing the information to write this blog I found out that the bank I chose has the highest grade based on the new methodology, with estimated loans per branch of more than $14M.
Why am I sharing this information in a blog? Because this is the type of decision-making process that I want to help small and mid-size businesses with. No, I don’t want to help them find a bank. I want to help small and mid-size businesses to choose cloud software solutions based on facts.
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