While national banks might be better for businesses that need larger branch networks and product selections, having a smaller scope helps community banks provide services that are faster, cheaper, and more personalized. Choosing a community bank business account also helps stimulate your local economy by creating local bank jobs, funding local businesses, and providing revenue that banks can reinvest in community projects.
Key takeaways
- Community banks are best for businesses that want personalized service.
- The benefits of using a community bank for your business include lower fees, lower rates on lending products, and faster decisions compared to national banks.
- Community banks stimulate the local economy by creating local jobs, reinvesting deposits into loans for local businesses, and contributing to community programs.
- Community banks typically have fewer branches and products. Most also have fewer resources to invest in sophisticated digital banking.
Here are the seven benefits of using a community bank.
1. You Get More Personalized Customer Service
Since community banks have a smaller customer base than their national counterparts, they are better able to provide personalized customer service. Representatives working at community banks are more likely to remember their customers and build stronger professional relationships.
2. You Pay Lower Fees
National banks typically charge higher fees because they have more customers to support, more branches to maintain, and more services to fund. Community banks, which are focused on a smaller group of clients, can typically charge lower fees for their services.
In addition, community banks are more likely to give you discounted rates or waived fees if you have multiple banking products with the bank.
3. You May Get Better Rates on Loans and Deposits
Since community banks have a better understanding of local market conditions, they adjust rates for their products accordingly. Sometimes, this means providing lower rates for lending products or higher annual percentage yield (APY) for deposits.
However, this is not always the case. Because community banks rely on interest earnings as direct revenue, they sometimes charge higher rates because they have fewer loan products than national banks. It is always good to shop around to ensure you are getting the lowest rates.
4. You Receive Faster Responses To Banking Requests
Because community banks have smaller client bases, you don’t have to compete with thousands of other customers for the attention of your banking officers. If you have a good relationship with your bank, your needs will be their priority. This means that they will provide more prompt answers to banking requests, such as customer support questions and approvals for loan and account applications.
5. Your Access to Relationship Banking Increases Your Likelihood of Loan Approval
Decisions at national banks tend to be impersonal. A national bank will look at objective data, such as your credit score or other scoring systems, to determine whether to lend you money. Meanwhile, community banks will look at other factors, such as your spending habits and financial history. This means you are more likely to have your loan approved with a community bank than a national bank.
6. You Stimulate Your Local Economy
Community banks use the funds from your deposits to provide financing and other services to their other clients, usually other businesses within your region. It keeps money circulating within your local economy.
Using your community bank also funds community bank employees and creates jobs for local residents.
7. You Give Back To Your Community
Since it is in a community bank’s best interest to keep the local economy thriving, it will often reinvest its earnings into local volunteer programs and community projects.
Drawbacks of Using Community Banks
While the benefits of using a community bank for your business are many, choosing a community bank business account also means facing limitations in geographic availability, product availability, and technology:
- Limited geographic availability: Typically, community banks only have fewer than 20 brick-and-mortar branches within a specific service area. If you need nationwide access to in-person banking and ATMs, it’s best to go for national banks, which typically have hundreds to thousands of branches across multiple states. You can check out our breakdown of the best small business checking accounts for good national bank options.
- Fewer services: Community banks typically only offer services that are in demand within your region. They may not offer products for more specialized needs, such as insurance, wealth management, and credit cards.
- Outdated digital banking: Most community banks have smaller teams than national banks, which means they typically have less support in building streamlined digital banking services.
- Banking restrictions: Some community banks won’t allow an individual to open a business account or get a business loan without having their personal banking there as well. If you are going to choose a community bank, it makes sense to have multiple banking products with that bank to build a strong banking relationship.
Frequently Asked Questions (FAQs)
Community banks will be more attuned to local market conditions and will tailor their products according to community needs.
If your priority is having a personalized relationship with a banking provider that understands your needs, then yes, choosing a community bank would be better for your small business. However, it is not the best choice if you need access to larger branch networks, wider product selections, and more sophisticated technology.
Active community banks create local jobs and keep money flowing within the local community. It will reinvest your deposits into other local businesses through its products and services. Some community banks might use the money they earn to support local volunteer work and charitable community projects.
Bottom Line
Using a community bank for your business is a great idea if you’re looking for affordable, personalized banking services from providers that understand local needs. They’re also a great way to give back to your community. However, businesses with more complex banking needs should look into national banks.
