Switching Banks

A good banking relationship is crucial to your business operation and, in many cases, the financial survival of your business.

Even if you are satisfied with the service quality of your bank, you should still meet with your bank at least once a year to discuss your banking requirements and potential areas of improvements in products and services. 

If you are not happy with the service of your bank, discuss it with them and review your bank accounts and facilities. Before making the decision to switch banks, ensure you thoroughly compare the services provided by your current bank(s) with those of the new provider and assess the strength of your relationship with your current lender. 

Ask yourself are there some intangible benefits in using your current lender who knows your banking and business history, which you may lose in a new relationship?  

Below is a checklist that you may find useful to review your bank accounts and facilities. 

Click each heading below to read more.

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Create a list of all bank accounts in your company

Include what the account is used for; bank account details such as branch, BSB, account number, account name; and any special arrangements with each account, such as set-off arrangements. All social accounts, old companies, branch accounts, petty cash accounts and special-purpose accounts should be included.

This information can be obtained from your bank statements or by asking your bank(s). You may be surprised at the number of accounts you have.


Obtain a letter of facilities

Request a letter of facilities from all the banks you deal with. The aim is to build a complete picture of all your banking arrangements with your financial institutions. In your letter, ask your banks to ensure all facilities are covered, including:

  • Credit or purchasing cards
  • Merchant facilities
  • Trade facilities
  • Lease facilities
  • Any information on loans that the bank provides
  • Letter of credit
  • Internet banking
  • BPay
  • Cheque cashing

Select your top three preferred banks on your business priorities

How you select your top three preferred banks can be based on any criteria, such as the bank you have the most transactions with, the quality of their service, friendly staff, convenience, or pricing sensitivity.

Knowing the existing or likely account manager (and having a favourable impression) is often a good reason to include a bank in your list.


Meet with your current bank

Once you have collected the required information, you are ready to meet your bank. The aim here is to give your existing bank first chance of improving the price and/or service or any other criteria you have noted in step 3.

When the bank has all your information, ask your banker what will be the best package and fees available to you. Usually, a bank will give you its best rates when you agree to do all transactional banking arrangements through them.


Review your current bank’s offer

The areas you should be reviewing are loan fees, interest margins, merchant facilities and cash handling if you are in a retail business. However, this will vary according to your business.

If your current bank offers you improved pricing and service levels, you may wish to stay with your current bank and stop the review process. We recommend you then ask your bank to detail a letter of agreement including the renegotiated fees, charges and service levels offered. If possible, negotiate for these revised terms to apply for one to three years. If your bank does not offer a better deal in pricing, you should find out why and what is missing from the picture


Meet with alternative banks on your list

If you are not happy with your current bank’s offer, make an appointment with the next bank on your preferred bank list. If you disclose your current pricing, the second bank may only offer you a deal that is slightly better than that of your current bank. Due to the cost and resources required to move to a new bank, it is generally not advisable to move banks unless the new bank offers substantially better pricing, product or service.


Remember to consider

Consider the following factors before you change banks:

  • Will your business incur additional costs as a result of switching banks?
    For example, costs in notifying customers and suppliers, changing deposit and cheque books.
  • Does the new bank’s service match your priorities?
    You may be able to find out by talking to some of their customers. You may have customers or suppliers who have an account with the new bank.
  • Give preference to the bank that allows you to meet with bank staff other than your account manager. This should include the bank manager and perhaps even the regional manager. Staff movements occur on a regular basis within banks so it is preferable that more than one staff member of the chosen bank has an understanding of your business and the banking relationship.
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