Banking Relationships: Structure and Optimization for Growing Companies

Most business owners think about banking transactionally: deposits, payments, and maybe a line of credit. Strategic treasury thinks about banking relationally: how can this partnership help us grow?

The right banking structure improves cash visibility, reduces fees, enables better credit terms, and provides options when you need to pivot. The wrong structure creates friction, costs money, and limits your options.

Account Structure

How you structure bank accounts affects cash visibility, control, and efficiency.

Core Accounts

• Operating account: Primary account for day-to-day business. Where receivables land and payables go out.
• Payroll account: Dedicated account funded just before payroll. Limits fraud exposure—if compromised, only payroll funds at risk.
• Reserve/savings: Account for operating reserves, earning interest. Keeps reserves visible but separate.

Additional Accounts (If Needed)

• Collections account: Dedicated account where customer payments land, swept to operating daily/weekly
• Controlled disbursement: Account with daily notification of checks clearing—better cash forecasting
• Escrow/trust: If you hold client funds, separate from operating
• Entity-specific: Each legal entity typically needs its own accounts

Best Practices

• Minimum complexity: Don't create accounts you don't need. Each account is another thing to manage and reconcile.
• Clear purpose: Each account should have one clear purpose. Mixing purposes creates confusion.
• FDIC awareness: Remember FDIC insurance is $250K per depositor per bank. If you have more, consider spreading across banks.

Credit Facilities

Credit facilities provide liquidity buffer and working capital flexibility.

Types of Credit

• Revolving line of credit: Draw when needed, repay when you have cash. Interest only on drawn amounts. Most flexible for working capital.
• Asset-based lending (ABL): Borrowing capacity based on eligible receivables and/or inventory. Borrowing base determines availability.
• Term loan: Fixed amount borrowed, repaid over time. Better for capital expenditures or acquisitions.
• Equipment financing: Loans or leases for specific equipment, secured by the equipment.

When to Get Credit

The best time to get a credit facility is when you don't urgently need it:

• Banks lend to companies that don't desperately need money
• Application process takes 4-8 weeks; don't wait until crisis
• Having a facility in place, even if unused, provides options
• Credit terms improve when you have time to negotiate

Credit Facility Considerations

• Size: Line should cover 2-3 months of operating expenses at minimum
• Covenants: Understand all financial covenants and ensure you can comply
• Pricing: Compare rate (SOFR spread), fees (commitment, unused), and covenants
• Personal guarantees: Try to avoid or limit; if required, understand exposure
• Renewal: Facilities typically have 1-3 year terms; track renewal dates

Relationship Management

Banking is a relationship business. Strong relationships provide better terms and more flexibility.

Building the Relationship

• Regular communication: Quarterly calls with your banker even when you don't need anything
• Financial transparency: Share financials proactively, not just when required
• Early warning: If you see covenant issues coming, tell the bank early. Surprises erode trust.
• Consider their perspective: Banks want stable, profitable relationships. Be a good client.

What Banks Look For

• Deposit relationships: Banks value operating deposits; keep meaningful balances
• Product usage: Using treasury management, merchant services, cards makes you stickier
• Financial performance: Profitable, growing companies are attractive
• Communication: Responsive, transparent management builds confidence

When to Switch Banks

Switching has costs (time, setup, relationship building). Consider switching when:

• Current bank can't meet your needs (international, industry expertise, credit appetite)
• Service quality has degraded significantly
• Pricing is significantly out of market
• You've outgrown a small/local bank

Fee Negotiation

Banking fees are negotiable. Most companies accept standard pricing; you shouldn't.

Common Fees

• Account maintenance: Monthly fee per account ($15-$50)
• Transaction fees: Per-item charges for checks, ACH, wires
• Wire fees: Domestic ($15-$25) and international ($25-$50)
• Positive pay: Fraud protection service ($50-$200/month)
• Online banking: User fees, module fees

Negotiation Tactics

• Understand your total relationship: Banks look at total profitability, not just one product
• Get competing quotes: Nothing motivates like a competitor's term sheet
• Bundle services: Commit to multiple products for better pricing
• Review annually: Fees creep up; review and renegotiate regularly
• Use earnings credits: Deposit balances can offset fees (earnings credit rate)

When to Add a Second Bank

One bank is simpler. But there are good reasons to add a second:

Reasons to Add

• FDIC limits: Deposits exceed $250K and you want insurance coverage
• Credit diversification: Don't want all borrowing from one source
• Service gaps: Primary bank can't meet a specific need (international, industry)
• Backup operations: Continuity if primary bank has issues
• Competitive tension: Having options keeps your primary bank honest

Considerations

• Added complexity: More accounts, more reconciliation, more relationships
• Relationship dilution: Splitting business may weaken each relationship
• Integration: Systems may need to connect to multiple banks

Choosing the Right Bank

Types of Banks

• Community/local banks: Personal service, local decision-making, may lack sophisticated products
• Regional banks: Balance of service and capability, good for mid-market
• National/money center banks: Full product suite, international capabilities, may feel impersonal for smaller clients
• Specialty banks: Industry-focused (tech, healthcare) with specialized knowledge

Selection Criteria

• Credit appetite: Will they lend to your industry, size, and situation?
• Product fit: Do they have the products you need now and will need as you grow?
• Service quality: Response time, error resolution, relationship manager quality
• Technology: Online banking, integrations, reporting capabilities
• Pricing: Fees, interest rates, overall cost
• References: Talk to other companies similar to you