Banks are as common as coffee shops these days. Finding your perfect bank takes lots of questions and research. Take some time asking mentors, other towing companies and some internet research to find towing company-friendly banks. There are several things you need to price out before creating a relationship. There is little more frustrating than having a relationship with a banker who won’t lend to your industry for equipment finance or expansion.
Things to Consider
One thing to consider is how you will get paid. You can receive payment via cash, check, automatic deposit (from insurance companies and auto clubs), and visa/mastercard. You need to know how much your bank charges for each of these transactions. Most banks give you a certain number of free transactions a month before charging a per transaction fee. Your merchant services account, your ability to receive visa and mastercard payments, does not have to be through your checking account bank, though there may be perks for doing so. For processing these payments, there is a flat monthly fee and a per transaction fee. You’ll want to find a processor who processes their own payments, not someone who contracts those out. Most contract out. You’ll also want to price renting a machine versus purchasing one outright.
Another thing to consider is lending. There are many ways to borrow money and even more reasons to do so. Banks lend on equipment not just the vehicle. They lend on vehicles. They have fixed rate loans and variable lines of credit. Most business lending requires two years in business with a profit. Fixed rates loans typically serve a specific purpose, often referred to as purpose loans, while lines of credit are open ended, serving different purposes at different times. it can be used for cash flow, expansion, smaller equipment purchases and whatever else comes along. All banks are credit driven, meaning your credit score is the primary decision maker in lending, followed very closely by income. The third should be relationship. You want to work with a bank who values all you do with them.
Credit cards are a necessary evil. Driving a tow truck takes lots of gas and you may have employees driving for you. You don’t want to send them cash or have access to your checking account via debit card. A good credit card allows you to manage their expenses, limits and allow you access to real time spending. Most credit cards offer rewards now as well. Cards shouldn’t have an annual fee unless its a travel card. Travel cards are for big spenders who don’t intend to carry a balance month after month.
Finally, you want a bank with a self-service friendly online banking option. You will be working 24 hours and won’t be able to fit most your banking into 9-5. You want to be able to transfer funds, pay bills, order checks, file disputes, and anything else you’re used to calling the bank for. Also, developing a relationship with a live banker at the local branch so you can email with questions.
You want someone who knows you. Someone who knows your industry, how your cash income stream is earned and what your major expenses are. A banker can be your best friend as a business owner.