Last Updated: February 16, 2024, 1:54 pm by TRUiC Team

Big Banks vs. Small Banks

The number of banking options may seem overwhelming, but you can start by splitting your choices into two categories: national and community banks. In this Big Banks vs. Small Banks article, we look at the differences between the two types to help you make the best choice for your business.

Recommended: Check out our review of the Best Banks for Small Business.

A close-up shot of a generic national bank

National Banks (Big Banks)

National banks are those large financial groups that span the entire country. These include established powerhouses like Citibank, Wells Fargo, and Chase

Here are some benefits of having a large bank account:

  • Widespread accessibility
  • Advanced technology
  • More financial services

Widespread Accessibility

National banks have thousands of physical branches and ATMs across the nation, making it easy for account holders to access their services whenever necessary. Some banks even have international locations, which is important to consider if you travel for business on a regular basis.

Advanced Technology

National banks tend to offer better electronic resources, such as online and mobile banking options. These resources are helpful if you need to access your bank after-hours.

More Financial Services

Banking with a large institution will give you access to more than just basic business banking and loans. If your business decides to look into investing or brokering, a national bank will have special advisors to help you take those steps.

That being said, some characteristics of national banks may not serve your business as well. A few things to consider:

  • Less personal service
  • Higher fees
  • Stricter regulations

Less Personal Service

Using a bank that has a global reach opens up the possibility of being seen as just another account number. This means that national banks can offer less personalized services than local banks or large credit unions.

Higher Fees

Larger banks often come with higher interest rates in comparison to community banks. This is important to consider if you’re working within a tight budget.

Stricter Regulations

Getting a loan from a national bank can be difficult if your business is new or if you have a low credit score. Because of their size, these banks won’t be as understanding as local bank services about your personal circumstances should your business fall on hard times.

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Recommended: Try Relay’s premium online banking platform. 

Local Banks (Small Banks)

Another option to consider in choosing a bank is your community bank. Local banks and regional banks cater to a smaller clientele and often have an increased focus on helping local businesses grow in comparison to large banks.

Other benefits of working with larger financial institutions include:

  • Customer service
  • Low fees
  • Flexible lending

Better Customer Service

Since their employee turnover rate isn’t as high, you can establish better, more personal relationships with your bankers at community banks. Furthermore, a smaller system means easier access to more highly-ranked employees.

Lower Fees

Local community banks tend to have lower ATM and monthly fees, which can make a significant difference for small businesses with low funds.

Flexible Lending

Banking locally can open up a lot of financial opportunities. Community banks tend to be less restrictive with their lending practices, making it easier to get a business loan with a lower credit score.

Of course, some aspects of smaller banks may not suit your business. The downsides of working with a community bank include:

  • Limited locations
  • Small business loans are limited
  • Less stable

Limited Locations

Depending on how small a community bank is, its reach may not extend beyond a single state. While this may be fine for a local operation, it could pose issues if you decide to expand your business. Plus, even if your community bank offers online services, it may prove difficult to make cash deposits or execute other transactions out of state.

Fewer Services and Smaller Loans

Small banks typically only offer a basic range of business services. Plus, while obtaining a loan from a local bank may be easier, they may simply not be able to provide the amount of funding your business needs.

Less Stability

While national banks are not invincible, community banks have a higher chance of going under. If you decide to use a community bank, it’s important to keep in mind that your finances may be at greater risk.

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Learn More: Read our How to Open a Business Checking Account article.

Which Bank Should You Choose?

Deciding on a bank that best fits your business is tricky — there’s no across-the-board answer for everyone.

Before settling on a bank, consider what your business’s specific needs are. Perhaps you only need simple business checking and savings accounts, or maybe you want a big bank that’s able to offer more sophisticated financial services.

You will also want to consider whether you want to work with exclusively online banks or large financial institutions with thousands of branches.

Whatever the case, we encourage you to take the time to shop around and learn what each bank can offer you.

Frequently Asked Questions

Whether big banks or small banks will be better for you will depend on your business’s specificities.

Generally speaking, smaller online banking and money management platforms offer lower fees,  as well as a higher number of third-party integrations and discounts. 

They can also have better customer service and a flexible lending experience. On the other hand, big banks are definitely the way to go when it comes to high accessibility and larger business loans.

All in all, you will need to weigh the pros and cons of each banking option before you make a final informed decision about what is best for you.

Not really, but this will depend on the bank in question. You can suffer losses from a big bank like Citibank or a smaller local bank, just the same.

Regardless of the size of the bank or banking platform, you will want to make sure that it is FDIC insured. This will ensure that your business’s funds are protected up to the FDIC standard amount of $250,000.

The main advantages of working with large banks as a business include:

  • Higher accessibility
  • Higher stability
  • Larger loans

The best small business banks, according to our review, are:

  • Relay
  • Brex
  • Novo
  • Chase 
  • Lili
  • NorthOne

All of them come with different pros and cons, but the majority of the business banking and money management platforms listed offer no monthly fees, low transaction fees, and a high number of accounting and payment processing integrations. 

This makes them ideal for ecommerce and other online businesses. 

For more information, see our review of the best banks for startups.

Both the FDIC and NCUA are insured up to a standard amount of $250,000, with the only real difference being that the NCUA insures credit unions, whereas the FDIC insures banks.

This means that the real choice you will have to make as a small business is deciding whether to work with a credit union or a bank, not whether you will have FDIC and NCUA insurance.

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