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Startup Finances: How to Find a Banking Partner That Grows with Your Business

Author Laura Lorta |

July 6, 2023

Startup Finances: How to Find a Banking Partner That Grows with Your Business

In the exhilarating journey of building and scaling a startup, one critical factor often overlooked is finding the right banking partner. As your business gains momentum, navigating the financial landscape becomes increasingly complex. The need for a trusted banking partner that understands the unique challenges faced by startups and offers tailored solutions to fuel their growth is paramount. In this guide, we unveil the secrets to finding a banking partner that goes beyond mere transactions and becomes a strategic ally in your startup’s financial journey. 

Startup Finances: How to Find a Banking Partner That Grows with Your Business

Look Beyond Traditional Banks

The traditional banking system is no longer the only option for startups. In recent years, online banks, credit unions, and fintech companies have emerged to offer innovative banking and lending solutions tailored specifically for startups. According to a 2019 report from CB Insights, fintech funding has grown by 120% over the past five years, reaching $40 billion worldwide.

Alternatives to Traditional Banks

With new players in the market, startups now have more choices than ever before. They should consider looking beyond the traditional banking partners that have dominated for decades. Some of the options to consider include:

  • Online banks: Online-only banks like Ally Bank and Axos Bank operate with lower overhead costs and pass the savings onto customers through higher interest rates and lower fees. They provide an easy digital experience tailored for tech-savvy startups.
  • Credit unions: Credit unions are nonprofit organizations offering lower interest rates and fees than large commercial banks. They are a good option for startups looking to minimize costs. Some credit unions specifically target startups and small businesses.
  • Fintech companies: Financial technology or “fintech” companies use technology to replace traditional banking services. Fintech lenders like Kabbage and BlueVine focus on providing startups with working capital and business lines of credit. Fintech banking partners often have a strong digital focus and can scale quickly with startups.
  • Combination: Some startups use various options, such as an online bank for core banking services and a fintech lender for additional capital. A diversified set of partners helps ensure stability even as the startup’s needs change.

With greater choice comes the opportunity to find banking and lending partners tailored to a startup’s unique needs. By looking beyond traditional banks to new innovative options, startups can find the right combination of services to fuel their growth. The key is taking the time to evaluate different choices and finding partners that fit both current and future needs.

Leverage Multiple Funding Sources

Don’t rely on a single source of capital to fund your startup’s growth. Establish a diversified portfolio of funding options, including venture capital, bank loans, online lenders, crowdfunding, angel investors, and more. According to a Harvard Business School study, startups that leverage multiple funding types have a 20-25% higher 5-year survival rate.

Venture Capital and Angel Funding

Venture capital and angel funding are ideal for innovative startups with high growth potential. VC and angel investors provide funding in exchange for equity in the startup. They also offer mentorship and industry connections. However, these funding sources come with high expectations for a lucrative exit. On the other hand, bank loans and online lenders provide debt financing without taking equity. While interest rates may be higher, the startup maintains full ownership and control.


Crowdfunding platforms like Kickstarter and Indiegogo are popular for startups to raise money from many small backers. This option is best for consumer products and causes that people can get passionate about. The startup pre-sells a product or experience to backers in exchange for their financial pledge. However, crowdfunding is also responsible for delivering on promises to many different backers.

Fuel Growth While Mitigating Risk

A balanced mix of funding types will fuel growth while mitigating risk. For example, a startup could raise a round of VC, secure a bank line of credit, and run a crowdfunding campaign for a new product launch. If one source falls through or needs to be paid back quickly, the startup has other capital to tap into.

Building a Business That’s Meant to Last

Diversifying funding requires keeping good records of different instruments, rates, equity deals, and payback terms. It also means managing various investor and lender relationships. However, establishing multiple capital sources is well worth the effort for fast-growing startups. The startup can accelerate growth and achieve critical milestones with a scalable funding model. The end result is a resilient business built to last.

Choose a Scalable Partner

One of a startup’s most important decisions is choosing a banking and lending partner. As a startup experiences exponential growth, its needs change quickly. The ideal partner should offer additional services to support startups at every growth stage.

Some key things to consider when evaluating a scalable partner include:

  • Range of services. Look for a partner that offers a checking and savings account and services like business lending, merchant services, payroll, retirement plans, and wealth management. As startups grow, their needs become more complex, so a range of services under one roof is ideal.
  • Capacity for growth. Make sure any potential partner has a proven track record of working with fast-growing startups. They should be able to handle exponentially increasing transaction volumes, loan sizes, and cash flows. Ask for customer references from other high-growth startups they work with.
  • Ability to lend more over time. If a startup relies on external funding, choose a partner that can increase lending limits as the business scales. For example, a partner may start by offering a $250K line of credit but can increase that to $2M or more within a couple of years as the startup establishes a track record of financial management and growth.
  • Experience with startups. Look for a banking partner with extensive experience working with startup businesses. They will have a much better understanding of startup funding cycles, costs, risks, and opportunities. They can provide more tailored guidance and help startups avoid common pitfalls.
  • Dedicated support. Growing startups require a high level of support. Look for a partner with dedicated relationship managers and underwriters who understand the startup’s unique needs, priorities, and timing. They should act as trusted advisors who can connect startups with the right resources and capital as needed to fuel growth.

Startups need a banking and lending partner that can grow and scale with the business. The ideal partner provides a range of services, has a proven capacity for growth, offers increasing access to capital over time, has experience working with startups, and provides dedicated support. With the right scalable partner, a startup can accelerate growth and reach its full potential.

Negotiate Fees and Rates

With more banking and lending options available now, startups have greater leverage to negotiate the best deals. While large traditional banks may offer some benefits, their fees are often significantly higher than newer alternatives like online banks and fintech companies. These upstart players are disrupting the market by offering lower fees and higher interest rates.

Comparing Options and Scrutinizing Fees

Startups should thoroughly compare options from different providers and negotiate to avoid fees that unnecessarily eat into their capital. Some fees to scrutinize include:

  • Monthly service fees: Many traditional banks charge $10-$30 per month for a business checking account. Newer options like online banks typically have no monthly fees.
  • Wire transfer fees: It’s common for banks to charge $25-$50 for incoming and outgoing domestic wire transfers. Some online banks provide a few free wires per month.
  • Early termination fees: If you need to switch banks quickly due to fast growth, early termination fees with a traditional bank could cost $25-$100. Look for no-fee options with easy exit terms.
  • Overdraft fees: Mistakes happen, but overdraft fees of $35 per transaction with a traditional bank can add up fast. Some online banks don’t charge overdraft fees at all. They simply decline transactions that exceed your balance.
  • ATM fees: Need cash in a pinch? ATM fees of a few dollars here and there become an annoyance. Many online banks and credit unions provide free access to large ATM networks so you can avoid fees altogether.

Choosing the Right Partner

While assessing and negotiating these types of fees, remember the human element. The ideal banking partner should provide great customer service and want to build a long-term relationship with your startup. Look for a team that understands startups, responds quickly to questions, and will guide you as your needs evolve. The right partner should feel like an extension of your team.

With some effort, startups can find banking and lending partners that don’t nickel and dime them with excessive fees. A scalable partner with reasonable rates and fees and a desire to support your business for the long run will help your startup achieve new growth and success.

Build a Long-Term Relationship

Choose a partner that provides great customer service and wants to build a long-term relationship with your startup. While assessing fees and rates, remember the human element. Look for a banking team that understands startups, responds quickly, and will provide guidance as your needs evolve. The ideal partner should feel like an extension of your team.

Choose a Partner Who Understands the Startup Journey

As a startup, you need a banking partner that will grow with your business for the long run. Don’t just focus on the numbers – also consider the actual people and service you’ll be working with. You want a partner that understands the startup journey and will be there to support you at every stage of growth.

Schedule Calls and Search for Alignment

When evaluating options, schedule calls to speak with account managers and relationship managers. Get a feel for their experience with startups and their level of enthusiasm for your business. Ask them questions to determine if they genuinely grasp the challenges of scaling a startup. You want a partner that responds quickly when you have questions or need to make changes. As your business grows exponentially, your needs will rapidly evolve, so you need a team that can keep up with your pace.

Look for Value-Added Services and Tailored Advice

Look for a partner that provides value-added services and advice tailored for startups. For example, they should offer guidance on managing cash flow, developing financial projections, and optimizing your funding strategy. They may connect you with strategic partners or additional resources to help your business thrive. The ideal banking team feels like an extension of your own team – they share in your vision and want to see you succeed.

While fees and rates matter, a great long-term partnership is invaluable for a startup. So take the time to find a partner that aligns with your values and working style. Look for a team that is enthusiastic, responsive, and committed to providing the highest level of service and support. A strong relationship with your banking partner will make the scaling process far more seamless and help ensure your startup’s success in the years to come. Choose wisely, as switching partners down the road can be a hassle. Find a partner you can grow with for the long haul.

Be Opportunistic and Strategic

As a startup, you need to be ready to take advantage of new opportunities as they emerge. The funding landscape is always changing, and new options become available as your company grows and the overall market evolves. If you see a chance to secure funding or resources that could help propel your growth, move quickly before that window closes.

Take Advantage of New Opportunities

For example, a new fintech lender may enter the market with an attractive offer for startups in your industry. They’re eager to build their portfolio, so they’re offering loans at a lower interest rate and higher amount than other lenders. If that opportunity aligns well with your needs, apply right away to take advantage of their offer before the rates and amounts change. These types of opportunities often only last for a while.

Leverage Investor Enthusiasm

An investor may also express a strong interest in backing your startup. They may believe in your mission or see the potential for a big exit. While you must still vet the investor to ensure a good fit, move fast to leverage their enthusiasm. If you delay for too long, their interests could shift to another startup. Strike while the iron is hot.

Only Consider Options That Align with Your Vision and Values

That said, you must remain strategic in which opportunities you pursue. Not every new lender or investor will be the right choice for your startup’s growth needs. Only consider options that suit your values, vision, and risk profile. Make a quick but informed decision by determining if the opportunity is in line with your key priorities. If there are any concerns about the offer or company, keep looking for a better match rather than settling in a rush.

By taking an opportunistic yet strategic approach, you can scale your startup efficiently and take advantage of key chances to accelerate growth. The funding environment will continue to evolve, so stay on top of trends and keep an open and curious mindset. With the right opportunity, you can gain access to resources that boost your startup to the next level. Seize these opportunities when they come, and your startup will be primed to rise above the competition. But always keep sight of your vision and values along the way; they should guide all of your decisions as you navigate the scaling process.


What role is technology playing in shaping the landscape of financial services for startups?

Technology is revolutionizing the financial landscape for startups by introducing various online banking and fintech solutions. These technology-driven financial services have reshaped how startups manage their banking and lending needs. By leveraging technology, these new entrants into the financial landscape provide innovative products and services specifically designed to meet startups’ unique needs and constraints. This includes user-friendly digital interfaces, efficient application processes, flexible lending options, high-interest rates, and low fees.

How can a startup determine which combination of online banks, traditional banks, credit unions, and fintech companies best suit its needs?

Startups should begin by thoroughly researching and comparing the offerings of online banks, traditional banks, credit unions, and fintech companies. Each has its merits and demerits. Startups should consider fees, interest rates, services offered, scalability, and convenience. Another important aspect is the bank’s understanding of the startup ecosystem and ability to provide customized solutions. Essentially, a startup needs to evaluate its current and future needs and choose an optimal combination of cost, convenience, scalability, and support.

What are some strategies that startups can adopt to effectively navigate and take advantage of the changing funding landscape?

To strategically navigate the ever-evolving funding landscape, the first step for startups is to stay abreast of the latest trends and opportunities in the financing space. This could entail following industry news, attending events, or networking within the startup ecosystem. Once aware of the different funding options available, startups should evaluate each based on cost, equity dilution, repayment terms, and alignment with the startup’s objectives. In addition, startups ought to be agile and rapidly respond to new financing opportunities while maintaining a clear perspective of their strategic goals and risk appetite. Lastly, startups should consider diversifying their funding sources for increased stability and resilience.

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