As our last post on this topic showed, many factors can make one bank more attractive than another. The considerations in that post, though, apply to small businesses in any industry. In this post, we’ll take a look at small business financial services that banks offer specifically to address the needs of property management companies.
Most banks offer a suite of services for clients with small businesses, like attorney referrals and automated clearing house (ACH) origination. Jenn Lampa, a property manager with Isalia Property Group in Boston, says her bank went the extra mile by giving her a remote scanner that lets her scan rent checks for deposit right in her office.
“That’s huge, because we bank at a smaller bank and they don’t always have ATMs nearby,” she says.
(Something we didn’t cover in the last post about larger banks: find out how many branch locations a bank has, and ask management about their long-term plans. A National Real Estate Investor article points out that many larger banks are rapidly reducing the number of branches they operate.)
Capital financing services
Another key banking service that may be attractive is capital financing tailored to the needs of property management companies. Such financing is critical if, for example, your five-year plan includes converting fuel oil furnaces to gas furnaces. Look for banks that offer help with special loans for these types of purchases through state and other government agencies that may have offer energy-efficiency programs.
Capital financing service are also important if your business plan includes acquiring new multifamily housing properties. Look for a bank with a dedicated real estate group that not only finances property purchases but also helps you find them and vet them as worthwhile investments.
International banking services
Owners who live outside the country add another layer of complexity to operations because it’s critical to get payments to them on time. You could have owners maintain U.S. bank accounts, but often that’s not realistic, so it pays to work with an institution that offers international banking services.
One such service is international wire transfers. Find out what the steps are for setting up both one-time and recurring wires, and compare any fees that apply. Ask how long the bank takes to set up and send out a wire, and how it confirms when transactions have been completed.
Banks that really want your business may offer set up accounts for your clients set up account, making international transactions unnecessary.
Mortgage financing for growing your business
Lampa originally had accounts at a large national institution, but switched recently to a small local bank. Because the bank held mortgages on several Isalia properties, Lampa decided it made sense to handle day-to-day business there, too.
“When you deal with them every day, it just leads to a better relationship than only having your mortgage there,” she says. “They know our business, they know our goals, and it makes everything easier.”
Even if you aren’t looking for mortgage financing right now, it makes sense to look at the bank’s rates. Take a look at national interest rates, then compare them with what the bank is currently offering. Are the bank’s rates competitive? Does the bank make it easy to make mortgage payments from trust accounts, or for owners to make payments?
Trust accounting considerations
Depending on your state’s laws, you may be required to maintain security deposits in a trust account. (Nolo.com has a good list of state laws and rules on tenant deposits.) Do your due diligence to make sure your trust accounts are legitimate trust accounts, especially if you live in a state where security deposits must be kept in a trust account separate from the owners’ trust account.
Trust account fees can add up quickly, so ask the following questions:
- Does the bank require a minimum balance for trust accounts?
- Is there a one-time setup fee? If so, is it assessed at the beginning of the year or at other times?
- Is there an annual fee for trust services?
- Does the fee apply to all trust accounts, or is there a separate fee for each one?
- Is it a flat fee, or is it based on a percentage of the funds in the account?
- Are there special handling fees, for example, for wire transfers from trust accounts?
The customer service difference
It sounds old-fashioned, but those of us who bank at huge conglomerates have forgotten that at small local banks, the bankers actually know who you are. Lampa points out that banking where people know you – and where there are fewer bureaucratic layers – makes for a great business partnership.
“Property management is all about efficiency, but when you’re working with the bigger banks and they don’t get back to you quickly, that slows you down,” she says. “We were apprehensive about switching to a smaller bank, but it was one of the best decisions we ever made.”
When it comes to banking, do you prefer a smaller bank with personalized customer service? Or do you large banks with hundreds of service options, ATMs, and branches work best for you? Please let us know in the comments section below.
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