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Bigger is Better –By Mike, The Entrepreneur

March 3rd, 2010 23 Comments

big banks

Small banks suck (to put it plainly). I don’t care what you’ve heard or what you think; using a small bank for your business needs is risky and can be detrimental to your success. This is one case where BIGGER is better.

For my businesses, I’ve gone the small bank route and was burned multiple times. You’ve heard it all before:

  • “Small banks care more about their customers and provide better service” – FALSE
  • “It’s easier to get a loan or line of credit” – Ehhh! Try again…
  • “Small banks make less risky investments and are more safe and secure for my money” – Are you kidding me?

The larger banks have so many more tools that can make life easier for an entrepreneur. But most of all, they provide better security for your money. In a time when identity theft is rampant and fraudulent online transactions are growing exponentially, the larger banks are taking huge strides to combat this.

Most large banks are also publicly traded, meaning their books are open to the public. There are many savvy businessmen that won’t use a certain bank until they’ve combed through their balance sheets and investment practices. Good luck trying to get that kind of information from a “Mom and Pop” bank. Considering the recent economic collapse and torrent of bank failures, this type of caution should always be exercised.

Trust me…stick with the big guys on this one.

I use Bank of America. And I always will.

  • erg

    i believe it was banks both big and small that failed or needed a bailout. this is poor advice to a banking novice who may not have more than a simple checking and savings account. all banks would be FDIC insured up to $100K (or more) and credit unions (which are both big and small) are historically the best for rates and credit. the larger banks are usually the ones that have ungodly erroneous fees and charges.

    • Hi Erin,
      This article was geared more towards small business owners looking for a bank. From a business owner’s stand point, having confidence in how your money is being handled is key. Small banks can be scary in that regard.

      As for credit unions, that’s a whole different animal operating under a different set of rules. I don’t think they’re insured by the FDIC, I think it’s the NCUA. I don’t have much experience with credit unions, but I do have friends that are trying to get smaller loans for their businesses that the bigger banks wouldn’t touch. I’ve also noticed an increase in small business owners considering using local credit unions. So that’s a good point that you made. But again, when it comes to security, tools and accessibility (most credit unions aren’t national), I don’t think the larger banks can be beat.

  • Maggie

    This is an incredibly poor post. I don’t necessarily disagree with you, but you’ve offered no evidence to support your claims, other than an all-caps “FALSE” and some vague personal opinions. Please do your readers a favor and provide actual information when offering a recommendation, instead of “Because I say so” arguments.

    • I could write a book on my experiences with different banks. I’ve tried a lot of them, and I’ve had a lot more negative experiences with the smaller ones. Small things such as depositing checks/cash into the wrong accounts due to poorly trained tellers and lack of protocol to transfers not going through because their networks are always down is just the beginning.

      Specifics – One of the worst experiences I’ve had was when an ex-employee stole several blank checks from my office. He wrote three $3000 checks and had his friend cash them on the same day. The bank’s cameras weren’t recording (imagine that), so we could never verify who it was. They signed the check with a fake name (not even mine), but the tellers were laid-back about verifying signatures. What makes this story even worse is he cashed two more checks at their 2nd branch the very next day before we knew what was going on. No red flags, no account alerts. Did I ever get the money back? Nope. He endorsed the checks Kok H. Ung. Not even the president of the bank found that suspicious when looking at the checks afterwards.

      I have numerous other experiences as well. Some are heartbreaking and some are just annoying.

      I switched to B of A some time ago and didn’t look back. I’ve never had a problem since. This isn’t a “because I say so post.” I’m truly speaking from my heart and my experiences when I say small banks can sometimes be dangerous for new business owners.

  • Erin

    I agree with Maggie. This post doesn’t sit well with me, especially because your expert doesn’t give any real information or examples. To me, big banks are the Walmart of the banking and finance world.

    • Please note, no one is an “expert” Entrepreneur. Mike has launched several successful businesses and shares his experience with you here.

      I hand-picked each contributor because they are passionate, personable, and experienced in their field. “Expert” is a term people use lightly these days. In any medium you have to read critically. Here at MTM, we don’t claim to be experts, but want to share the wisdom of our experiences.

  • Erin


    Thank you for checking back in and clarifying. I think this can be a real hot topic because people’s experiences can vary widely. I used to go through Bank of America, but closed my accounts down because of similar experiences you had with the smaller banks (poorly trained tellers, lack of help after an identity theft). Since then, I now bank with ESL Federal Credit Union and a much smaller, local bank. Since my husband and I are not business owners (yet!) this system works out great for us. We feel that we’re keeping our money invested locally and helping keep local jobs in the area.

    I appreciate you coming back and explaining what you meant in your original post. Good luck in your future endeavors!

  • Jo

    Wow. This is a seriously poorly written and uninformative post – it barley touches exactly why the author would make a blanket statement:

    “Small banks suck (to put it plainly). I don’t care what you’ve heard or what you think; using a small bank for your business needs is risky and can be detrimental to your success.”

    I can respect your frustration with the limited number of banks you have dealt with but that would be like saying “Independent Restaurants SUCK – stick to the chains. Shout out to the Olive Garden!!” There are many, many options when it comes to smaller banks – some horrible, many fabulous, and if you really wanted to write an informed post on the debate something more than a few flaky tellers didn’t verify your signature and “Easier to get a loan – FALSE.” would be helpful.
    As for being FDIC insured, even in your reply you were too lazy to research. I am an entrepreneur myself and have a few various accounts for business and personal. My HSBC account (big bank) is FDIC insured for $100,000 – Nordstrom Bank (small bank) for $200,000. My account at the AFTRA-SAG credit union is insured for $250,000 by the NCUISF which has the same full faith US Government guarantee they give the FDIC.
    As for the loan, the are SO many factors that determine approval, there is no way you can assume it is easier to get a loan from the big banks. The same person could go into the exact same bank you had a problem getting a loan from, right after you, with a lower salary but 30% less utilization on their credit cards and get approved for the exact same loan and say “Hey! It’s sooo easy to get a loan from my small bank!” If you are the type of person who just pays their bills on time and walks into a bank and applies for something and is just happy to be approved with what sounds like a good rate, without KNOWING beforehand, via research, what you qualify for at that particular bank, you really have no place writing financial posts at all, unless you take the time to research subjectively. Banks and credit cards are notorious for offering you a lower rate than you are qualified to get because they make more money and as long as you accept then both parties are happy – you ignorantly so. There are so many pros and cons to big and small banks – NONE of which you listed. All three of your “statements” could be very easily argued just from personal experiences alone, not statistics or comparative facts. I don’t care enough to elaborate more than I have because the fact you hit “publish” on this post is reason enough for me to assume (a.) you don’t care that much – hence the hard core devotion to one of the shadiest sub-prime banks out there, and (b.) you couldn’t be bothered to research much for your follow up posts, so it will probably fall on deaf ears.

    In summary – I, a female entrepreneur, LOVE small banks and credit unions. I only have an account with a large bank to deposit cash and transfer into my *better account* with a small bank. Bank of America can kiss my 805 credit score and suck it, because those bottom feeders have nothing good enough for me.

    • (Sorry, I just missed it.)

      I don’t believe Mike is telling anyone to not do their research before applying for a loan. The way I read the post was that he is strongly suggesting you consider larger banks due to his past experience (which is extensive, not that you should take our word for it).

      I think if you posted a question regarding loans specifically, he would go into greater detail as you have here. He is a seasoned entrepreneur, but new to blogging. So let’s give him some time to get his feet wet before we start pushing his head under water.

    • Hi Jo,

      Actually, given my experience, I would recommend opening a chain restaurant over an independent. And I wish I owned an Olive Garden.

      As for my experience with a “limited amount” of banks. How do you know how many banks I’ve dealt with? I would say it’s anything but limited.

      When I make a money transfer for payroll, which doesn’t go through because of the banks network, and I bounce 50 employee checks, that’s not a small problem. And a few “flaky tellers,” that just happened to work at all of their branches, cost me $15,000 in two days. The fact that it occurred at two branches is evidence enough that something else was seriously wrong. It’s the small details that can be really frustrating, like not setting the teller booth security cameras to record or not offering email notification when a transaction over a certain dollar limit has occurred. And this was not an isolated incident. I’ve had multiple associates have similar and more significant problems at other small banks. Now I’m not saying everyone has bad experiences at small banks, but a good majority of those I’ve done business with (myself included) are of the same opinion. What made me write this post are my experiences, not what I found from a Google search.

      As for my research, I believe the NCUISF is administered by the NCUA. Right? I apologize if I got my acronyms wrong, but I did do my research. You’re also taking my loan statement a little too seriously. I never said it was easier to get loans at bigger banks, nor did I ever say you shouldn’t do your research. The short post I wrote wasn’t about loans. I was simply stating a common fallacy that I’ve heard time and time again. I was placing more emphasis on tools and security.

      I do care, which is why I’m spending the time to write these posts. And I’m glad you’ve had a much better experience with small banks than I have.

  • Jo

    And P.S. No, I am not an EXPERT either….just a fashionista who reads, researches, and is in charge of my finances ;)

  • Jo

    Okay…so you approve my “P.S.” but not my first comment criticizing this poorly written post? I took more time to look up and compare the FDIC protection amounts on my accounts at both big and small banks than Mike did for this uninformed contribution to your business venture. I’m actually really surprised. Nice “community”, Mary.

    • To my knowledge I have approved all comments on this post. My apologies, I’ll go back and look.

      For future reference, it’s easier for me to search if you are consistent with a valid email address, AND if one of your comments is approved, then your follow up comments are instantly approved.

      I’ve had some problems with spam so that’s why the approval process is still in place.

  • Jo

    Mike, I appreciate your reply and can understand the frustration you’ve had with your banking. Everyone has their preference and we can definitely agree to disagree. I apologize for the bitchy undertone of my post – rereading it sounds a lot ruder than I initially intended. I still think this post left a lot to be desired and with your background in entrepreneurship I am sure you have a lot of insight to share that would be really interesting to read about. I think it’s the overall “I don’t care what you’ve heard – small banks SUCK. End of story.” vibe that turned me off. But I do apologize for being a cranky bitch. I do like the new site design and format you have going on here Mary and I hope I didn’t scare Mike off from blogging. ;)

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