Startup founders face countless challenges–including choosing the right bank or source of financing. 

Choosing the wrong bank for financing your startup can lead to unnecessary fees, limited access to credit, and missed opportunities for growth. 

On the other hand, the right banking partner can provide valuable support and help startups navigate the complex financial landscape to unlock their full potential. 

In this article, we'll explore some banks that cater specifically to startups, evaluating their offerings and limitations. We'll also discuss alternative funding options, such as revenue-based financing, that can help startups scale–without giving up equity.

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Do banks give loans to startups?

While some banks offer loans to startups, securing traditional bank financing can be challenging for early-stage companies. Banks typically require collateral, a solid credit history, and a proven track record of success.

Additionally, the risks associated with lending to startups can be too high for banks. As a result, startups often explore alternative financing options, such as revenue-based financing, invoice factoring, venture capital, or merchant cash advances, to access the capital they need to grow and scale their operations.

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How to Choose the Right Bank for Your Startup

When evaluating potential banks, consider the following factors:

Debit, credit, and lending options 

Consider banks that enable easy payments via debit or credit card networks. Additionally, look for banks that provide business credit cards with rewards, such as 2% cash back or 3x points on business expenses, saving you money on everyday purchases.

As a startup, access to credit is crucial for managing cash flow and investing in growth. Look for banks that offer specialized loan programs tailored to startups. You may also consider those banks offering loans for businesses with lower credit score requirements (e.g., minimum 600) or higher loan-to-value ratios (e.g., up to 90%). 

Charges, fees & interest rates

Pay close attention to fees for account maintenance, transactions, and overdrafts, and look for banks that offer fee waivers or discounts for startups. For example, some banks may waive monthly maintenance fees for the first 12 months or offer a certain number of free transactions per month.

Startups often operate on tight budgets, so compare interest rates across different banks, focusing on those that offer lower rates for business loans and lines of credit.

Bank location

While many banking operations can be handled online, having a physical branch nearby can still be beneficial. Plus, you might want to access a large network of ATMs, a perk that only larger banks can boast. 

However, if you don’t need in-person services, an online-only bank might offer the best features and services.

Payment services

Explore which payment methods you can utilize, such as domestic and international wires, card payments and ACH. Managing and keeping track of your startup’s cash flow is another essential factor when considering your banking option. For instance, features like automatic bill pay systems can help you automate parts of your banking. Some banks provide features like recurring payments and the ability to pay multiple bills simultaneously - as well as expense management solutions. 

Payroll and employee management options 

For employee management, consider banks that offer payroll services or integration with popular payroll software. Look for features like direct deposit, tax filing assistance, and the ability to easily manage employee expenses. Some banks also offer virtual card solutions for employees, making it easier to track and control business spending.

Currency options

If your startup operates internationally or plans to in the future, you should consider a bank with multi-transactional capabilities. That way, you can hold and transact different types of currency and make the foreign exchange process as simple as possible. 

Lastly, consider banks that offer international payment solutions integrated with their online banking platforms, making it easier for you to manage global transactions.

Accessibility and ease of use 

For startups, time is a precious commodity. Choose a bank that offers a user-friendly online banking platform and mobile app, allowing you to manage your finances on the go. Look for features such as online bill pay, remote check deposit, and 24/7 customer support. 

Additionally, consider banks that offer seamless integration with popular accounting software, like QuickBooks or Xero, and payment tools, like PayPal or Stripe.

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Top Banks for Startups

Now that we’ve covered how bank loans typically work, here are the top banks for startups:

1. Wise

‍Wise, formerly TransferWise, is a London-based financial technology company that offers international money transfer and banking services.

Services and benefits: 

• Multi-currency accounts allow you to hold, send, and receive money in over 50 currencies
• Wise debit card offers competitive exchange rates and low fees for international transactions
• API integration enables seamless payment processing and automation for your startup

Limitations: 

• Limited lending options compared to traditional banks
• No physical branches for in-person banking services

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2. Mercury

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Mercury is a digital bank designed specifically for startups and technology companies designed for simplicity and efficiency.

Services and benefits: 

• Free FDIC-insured checking and savings accounts with no minimum balance requirements
• Virtual and physical debit cards with customizable spending limits and controls
• Integrations with popular business tools like QuickBooks, Xero, and Stripe

Limitations: 

• No lending products available, such as loans or lines of credit
• Limited customer support options compared to some traditional banks
• Mercury's services are primarily focused on the U.S. market

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3. US Bank

US Bank is a traditional financial institution that offers a range of banking services for businesses, including startups. As the fifth-largest bank in the United States, US Bank provides a mix of online and in-person banking options.

Services and benefits: 

• Suite of business banking products, including checking, savings, and money market accounts
• Lending options such as term loans, lines of credit, and SBA loans
• Network of physical branches and ATMs across the United States

Limitations: 

• Higher fees and minimum balance requirements
• Longer application and approval processes for loans and other financial products
• Less focus on technology integrations and startup-specific features compared to neobanks

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4. Rho

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Rho is a digital banking platform designed for high-growth startups and small businesses. With a focus on automation and customization, Rho helps streamline financial management for modern companies.

Services and benefits: 

• Customizable banking solutions tailored to your startup's specific needs
• Automated bill pay and invoice management features to save time and reduce manual work
• Integrations with popular accounting and business software like QuickBooks and Slack

Limitations: 

• Relatively new player in the market with a limited track record compared to established banks
• No physical branches or in-person banking services available
• Some advanced banking features may require additional fees or higher account balances

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5. Silicon Valley Bank

Silicon Valley Bank (SVB) is a well-known financial institution that specializes in serving technology and life sciences companies. Despite its recent challenges, SVB remains a popular choice for many startups due to its industry expertise and network.

Services and benefits: 

• Deep understanding of the unique needs and challenges of technology and life sciences startups
• Wide range of financial products, including venture debt, lines of credit, and term loans
• Extensive network and resources to support startups' growth and success

Limitations: 

• Recent liquidity crisis and FDIC takeover may raise concerns about the bank's stability
• Higher minimum balance requirements and fees compared to some digital banks
• Primarily focused on the U.S. market, with limited international banking capabilities

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6. First Republic

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First Republic is a private bank and wealth management company that offers personalized banking services to startups and high-net-worth individuals. First Republic focuses on exceptional customer service and long-term relationships with its clients.

Services and benefits: 

• Dedicated relationship managers provide personalized attention and support
• Competitive interest rates on deposit accounts and lending products
• Wide range of financial services, including private banking, wealth management, and trust services

Limitations: 

• Higher minimum balance requirements and fees compared to some traditional and digital banks
• Limited geographic presence, with branches primarily located in urban coastal areas
• May not offer the same level of technology integration as some neobanks

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7. Chase

Chase is one of the largest and most well-known banks in the United States, offering a full range of banking services for businesses of all sizes, including startups.

Services and benefits: 

• Extensive network of physical branches and ATMs across the United States
• Wide range of business banking products, including checking, savings, and lending options
• Robust online and mobile banking platforms with features like account alerts and bill pay

Limitations: 

• Chase has higher fees and minimum balance requirements compared to some digital banks
• Longer application and approval processes for loans and other financial products
• Less specialized support for startups

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8. Bank of America

Bank of America is another major U.S. bank that offers a comprehensive suite of banking services for businesses, including startups. With a large network of branches and a focus on technology, Bank of America aims to meet the diverse needs of its clients.

Services and benefits: 

• Extensive network of physical branches and ATMs across the United States
• Wide range of business banking products, including checking, savings, and lending options
• Advanced online and mobile banking platforms with features like cash flow monitoring and virtual assistant

Limitations: 

• Higher fees and minimum balance requirements compared to some digital banks
• Traditional banking road bumps such as longer application and approval processes for loans and other financial products
• Less specialized support for startups compared to some neobanks and technology-focused banks

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9. Arc

Arc is a digital bank that offers a range of financial services tailored to the needs of SaaS startups.

Services and benefits: 

• Designed specifically for SaaS startups, with features like recurring revenue tracking
• Fast and easy application process, with accounts typically approved within 48 hours
• Competitive interest rates on deposit accounts and no hidden fees

Limitations: 

• Narrower range of financial products compared to some traditional banks
• No physical branches or in-person banking services available
• Limited track record as a relatively new player in the market

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10. Revolut

Revolut is a UK-based digital banking and financial technology company that offers a range of services for businesses, including startups.

Services and benefits: 

• Multi-currency accounts allow you to hold, send, and receive money in over 30 currencies
• Competitive exchange rates and low fees for international transactions
• Integrations with popular business tools like Xero, Slack, and Zapier

Limitations: 

• Limited lending options compared to traditional banks
• Doesn’t have physical branches for in-person banking services
• Some advanced features and higher transaction limits require paid subscription plans

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11. Brex

Brex is a financial technology company that offers corporate credit cards and cash management accounts designed specifically for startups and growing businesses.

Services and benefits: 

• No personal guarantee or credit check required for corporate credit cards
• Higher credit limits compared to traditional business credit cards
• Automated expense tracking and categorization to simplify bookkeeping

Limitations: 

• Limited banking services beyond credit cards and cash management accounts
• No physical branches or in-person banking services available
• Some features and benefits may require a minimum account balance or subscription plan

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Alternatives to Bank Loans for Startups

Bank loans are one funding option that startups may consider when they need additional capital. However, these often come with strict requirements and high interest rates that can burden startups. Revenue-based financing (RBF) companies are a great popular alternative, offering a more flexible and accessible way to secure capital.

RBF allows your startup to receive funding based on your recurring revenue with a fixed financing amount and monthly repayments. For example, say your ARR is $500k and you’d like financing of $250k. 

A financier might give you $250k at a 10% fixed fee, and at the end of a 12 month term, you’d repay $275k in total, divided into monthly payments. Plus, you can get funding within 72 hours depending on the company you choose to work with.

If you’re a SaaS company, Efficient Capital Labs (ECL) is a leading RBF provider, offering up to $2 million in funding with a simple fee structure and rapid approval process. ECL's RBF is designed to support SaaS startups, with a 12-month repayment period and funding available in as little as 72 hours. Plus, ECL has its own $100M debt facility, meaning you’re not dealing with the terms of other financiers—just ECL.

If you're a startup looking for a fast, flexible, and founder-friendly funding option, apply now at ecaplabs.com.

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Learn More About Banking for Startups

Let’s take a look at some startup banking FAQs.

What happened with Silicon Valley Bank?

In March 2023, Silicon Valley Bank (SVB) experienced a significant liquidity crisis, leading to its collapse and subsequent takeover by the Federal Deposit Insurance Corporation (FDIC). The bank's failure sent shockwaves through the startup community, as SVB was a popular choice for many technology and life sciences companies. 

The incident highlighted the importance of diversifying your startup's financial relationships and carefully considering the stability of your banking partners.

Which bank is best for a startup business?

The best bank for your startup will depend on your specific needs, industry, and growth stage. Some banks, like Mercury and Silicon Valley Bank, specialize in serving technology and innovation-driven companies, while others, like Chase and Bank of America, offer a wide range of services for businesses of all types. 

However, for startups needing capital, banks may not always be the best source of funding for your startup because of the higher fees, large personal guarantees, and other strict requirements.

Should startups use multiple banks? 

Using multiple banks can help mitigate risk and ensure your startup has access to a range of financial services. By diversifying your banking relationships, you can reduce your exposure to potential bank failures or service disruptions. 

Plus, working with multiple banks allows you to compare offerings and negotiate better rates and terms. However, managing multiple bank accounts and mixing multiple credit cards can also increase administrative complexity. 

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Choose the best funding for your startup

While traditional banks and neobanks offer a range of financial services for startups, they may not always provide the most suitable funding options for your growing business. Bank loans often come with strict eligibility requirements, lengthy application processes, and inflexible repayment terms that can strain your startup's cash flow.

As you explore funding options to fuel your startup's growth, it's essential to consider alternative financing solutions that align with your unique needs and goals. Revenue-based financing, like the options offered by Efficient Capital Labs (ECL), can provide a more founder-friendly approach to securing the capital your startup needs to succeed.

With ECL, you can access up to $1.5 million in non-dilutive funding based on your startup's recurring revenue. The application process is quick and straightforward–with funding available in as little as 72 hours.

Plus, ECL has a 75% + repeat customer rate, evidencing the benefits it offers founders. 

Explore alternative funding options like revenue-based financing with Efficient Capital Labs and unlock the capital you need to achieve your startup's full potential.