How to Start a Bank Without Your Own Money in 21 Steps

Do you want to learn what it takes to start a bank and print your own money? If YES, here is a complete guide to starting a bank successfully without using your own money and with zero experience. Have you ever felt so unsatisfied with your bank before? If you have found yourself disgusted about how things are run in your bank, then you might fall into the category of some folks who wish they could own a bank.

It is good to point out from the beginning that starting a bank is not an option for you if you do not have the patience to go through all the conditions set by the Central bank of your country. You bet that the hurdles you would be subjected to scale aren’t few – this is so because the banking industry must be well regulated so that people can feel safe to keep their monies with them.

Now let’s drive the point home! Anybody that has the money, meets the laid down conditions and is free from financial frauds can acquire the license to start a bank. Don’t forget you don’t need all the monies in the world to start a bank.

What Does It Take to Start a Bank?

As a matter of fact there are different conditions for starting different categories of banks. For instance; the condition for starting a commercial bank is different from the conditions of starting a micro finance bank. So also the conditions and requirements for starting a community bank are different from the conditions and requirements of starting a Micro finance bank.

The financial services industry in the united states of America and in most parts of the world is highly regulated so as to guide against fraudulent practices from financial experts. As a matter of fact, once a certified financial expert is found guilty of finance related crimes, the fellow stand the risk of losing his or her certificates and membership of any financial related association that he or she belongs to.

Because of the sensitive nature of the banking industry, the body regulating and monitoring banking operations are always on their toe. So you must do all you can to keep your records clean and free from any trace of financial misappropriation and fraud to avoid your license from been revoked.

No doubt starting a bank has loads of requirements that you must meet before you can be granted a license to operate. So therefore, you are expected to approach the central bank of your country to obtain the procedures needed before you can qualify to open a bank and also the registration form.

The fact that these procedures varies from one country to another does not mean that they aren’t similar in the larger scheme of things. The idea of the conditions and requirements is to make it air-tight for fraudulent people to start a bank.

21 Steps to Starting a Bank Without Your Own Money

1. Understand the Industry

Statistics has it that over 80 percent of adults (18 years and above) that live in developed countries own at least a bank account and a large percent of them transact business with the bank at least once in the month. In recent time, internet banking and mobile banking is on the increase. People can now comfortably carry out banking transaction from the comfort of their homes, offices or cars et al.

Despite the fact that the banking industry has been around from time immemorial, the industry keeps growing and evolving. For example; before the 20^th / 21^st century, there is nothing like internet banking or mobile money / banking et al.

This goes to show that the banking industry is still growing. The industry is leveraging on technology to grow. Yes the industry might be said to be saturated, but one thing is certain, people will never stop opening banks as long as the law in their country permits it and as long as they have products that can appeal to their target market.

The factors and incentives that encourage investors and business men and women to venture into starting a bank are numerous. One of the key factors and incentives that encourage people to start a bank is the drive to make profits. There is no bank out there that is not driven by the motivation to make profits.

Other incentives could be to own a business portfolio in the banking and finance industry and to setup a business that can outlive you; one that you can pass down to your children and grandchildren et al.

2. Conduct Market Research and Feasibility Studies

• Demographics and Psychographics

The banking industry is one industry whose clients covers both infants and elderly people, teenagers and adults, students and working class, corporate organization and small scale businesses, the government (public sector) and the private sector et al. In essence, the demographic and psychographics composition of the banking sector is all encompassing; it covers everyone who owns money who also makes one transaction or the other.

3. Decide Which Niche to Concentrate On

The banking industry is one industry that has niches that an investor who is looking towards starting a bank can specialize in; these niches gives room for a bank to clearly define their target market and build their marketing strategies around it.

Here are some niches in the banking industry that an investor or entrepreneur can specialize in;

• Business Banking
• Bank of Industry
• Central Bank (Government owned)
• Commercial Banking
• Community Banking
• Community Development Bank
• Corporate Banking
• Co – operative Banks
• Mortgage Banking
• Merchant Banks
• Micro Finance Banking
• Land Development Banks
• Investment Banking
• Islamic Banks
• Private Banking
• Retail Banking
• Internet – Only Bank

The Level of Competition in the Industry

If you are conversant with the banking industry, you will realize that the level of competition in the industry is pretty high. Every bank is out there to win as much clients as they can hence the level of competition in the banking industry.

On the average, if you have started building a successful business, it is the practice for several banks in your location to always come knocking at your door to do business with you. These banks all know the stiff competition in the banking industry which is why they would always come knocking with mouthwatering deals.

The truth is that, if a bank must survive the competition in the banking industry, they must always come out with more creative and innovative products and marketing approaches.

4. Know Your Major Competitors in the Industry

There are several leading banks in the world and these leading bank cut across different niches in the banking industry. Here are some of the leading banks in the banking industry;

• Barclay Bank
• JPMorgan Chase, US
• HSBC Holdings, UK
• Deutsche Bank
• Bank of America
• Bank of China
• TD Bank Group, Canada
• Citigroup, US
• National Australia Bank
• UBS, Switzerland
• Banco Santander, Spain
• First Bank of Nigeria (Africa’s largest bank)
• Standard Group (south africa)
• Zenith Bank

Economic Analysis

Starting a bank is indeed a capital intensive business which is why most often it is big – time investors / accredited investors that venture into this part of business. As a matter of fact, the money required to obtain a banking license is usually on the high side (although it varies for different types of banks) and also the benchmark for the capitalization of banks is not the kind of money that can easily be obtained.

So, if you are looking towards starting a bank, then you should be guided by the type of bank you intend starting, the numbers of branches that you intend opening, the numbers of employees that you are looking towards employing, the kind of banking structure you want to put in place and loads of other factors that must be critically analyzed.

Of course no investor would want to start a bank without conducting detailed economic analysis; with detailed economic analysis, it is easier to make profit projections and growth projections et al.

5. Decide Whether to Buy a Franchise or Start from Scratch

Good enough, there are several opportunities for any investor who wants to own a bank to buy franchise from a successful bank; simply because there are several banks all over the world that are into franchising.

So, if you are looking towards starting a bank, then you have two options to choose from; one of the options is to buy a franchise and the other is to start from the scratch.

The choice of choosing how whether to start your bank from the scratch or to buy a franchise is dependent on loads of factors and it is not a decision that can be taken in isolation; your business plan and of course your business partners should be a major influence on your final decision.

Over and above, if your intention of starting a bank is to build a global brand and to be in full control of your bank, then your best bet is to start your bank from the scratch and build your brand the way you want it to be. But if your intention of starting a bank is to own a business portfolio in the banking industry and of course to make money, then you may consider buying a franchise.

6. Know the Possible Threats and Challenges You Will Face

There is hardly any business or investment opportunity that does not come with its own fair share of threats and challenges. This is why most organization conduct risk assessment on a regular basis so as to enable them produce strategies that will help them stay afloat in the industry.

One of the major threat and challenges that you are likely going to face when you start your bank is the presence of other banks that are offering same or similar products as your bank. For sure if you don’t have workable and winning strategies that will help you outsmart your competition in the location where you bank is located, then you are likely going to struggle to grow your bank and also retain some of the best hands under your employment.

Lastly, just as in any other business and investment vehicles, economic downturn, unstable financial market and unfavorable government economic policies can hamper the growth and profitability of a bank.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

Starting a bank is indeed a serious business so the legal entity you choose will go a long way to determine how big you want the business to grow. No doubt choosing a legal entity for a business such as a bank is some worth straightforward.

When it comes to choosing a legal entity for your bank you have the option of choosing from a general partnership, a limited partnership, an LLC, a “C” corporation, or a “S” corporation. It is important to clearly state that these different forms of legal structure for business has its own advantages and disadvantages; which is why you must weigh your options properly before making your choice on the legal structure to build your bank on.

These are some of the factors you should consider before choosing a legal entity for your bank; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and tax issues. If you take your time to critically study the various legal entities to use for your bank, then you will agree that Limited Liability Company; an LLC is most suitable.

You can start your bank as limited liability company (LLC) and in future convert it to a ‘C’ corporation or a ‘S’ corporations especially when you have the plans of going public.

Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your bank so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, stock market, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.

8. Choose a Catchy Business Name

When it comes to choosing a name for a bank, there is no hard and fast rule; usually most banks you find around always have the word bank as part of their name so as to indicate the kind of business you run, some also have words that clearly start the niche / type of banking business they run.

For example an investment bank will somehow carry the word investment so also a mortgage bank and bank if industry et al. These are some of the catchy names you can choose from if you intend starting your bank;

• Shannon and Shavonne Investment Bank (S & S Investment Bank)
• Assurance Trust Bank PLC
• Lakewood Community Bank
• Harry Porter Development Bank
• Apex Bank PLC
• Metro Bank Group
• Savannah Investment Bank
• Portland Mortgage Bank
• Dakota Micro Finance Bank
• Aries Merchant Bank
• Malachi Commercial Bank

9. Discuss with an Agent to Know the Best Insurance Policies for You

In the United States and of course in most countries of the world, you can’t operate a business without having some of the basic insurance policies that is required by the industry you want to operate from. Besides, the nature of the banking industry requires that you have the proper insurance cover in place or else you will be forced out of business if investment goes wrong.

So it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best insurance policies for your bank. Here are some of the basic insurance covers that you should consider purchasing if you want to start your own bank in the United States of America;

• General insurance
• Health insurance
• Risk Insurance
• Credit insurance
• Deposit insurance
• Financial reinsurance
• Lenders mortgage insurance
• Payment protection insurance
• Liability insurance
• Workers Compensation
• Overhead expense disability insurance
• Business owner’s policy group insurance

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

No doubt starting a bank is indeed a serious business hence you must do all you can to dot the ‘Is’ and cross the ‘t’s and one of the things you need to do is to file in for intellectual property protection. This is necessary because you must ensure that you bank logo and every other official document of your bank is well protected to guide against people taking advantage of the fact that they are not protected.

Most likely, you may want to develop your own customized software; if you happen to develop your own customized software application, then by all means you would need to apply for intellectual property protection. Lastly, there will be need for you to also develop unique banking products for your customers. The fact that there are competitions in the banking industry requires that you protect your brain child or else other will leverage on it.

11. Get the Necessary Professional Certification

Ordinarily as investor, you may not need a professional certification before starting your bank as longs as you meet the requirement as stipulated by the regulated body in your country. Be that as it may, your core management team is expected to belong to some key bodies in the banking and finance industry in your country.

At least some of your core management team should be chattered in accounting and finance, investment, risk and other financial and banking related areas.

12. Get the Necessary Legal Documents You Need to Operate

In The United States of America and of course all over the world, the banking industry is amongst the industries that are highly regulated. If you are considering starting a bank, then you are expected to meet the legal documents requirements as stipulated in the constitution of your country.

These are some of the basic legal document that you are expected to have in place if you want to start a bank in the United States of America;

• Certificate of Incorporation
• Business / banking License
• Business Plan
• Non – disclosure Agreement
• Memorandum of Understanding (MoU)
• Online Terms of Use
• Online Privacy Policy
• Apostille
• Employment Agreement (offer letters)
• Operating Agreement
• Company Bylaws
• Operating Agreement for LLCs
• Insurance Policy

13. Write a Business Plan 

If you are looking towards starting a bank, then one of the first steps that you are expected to take is to consult experts to help you draft a good and workable business plan. The truth is that, in order to successfully run a bank, you would need to have a good business plan in place.

A Business plan is the blue print that is needed to successfully run a business; with a workable business plan in place, you will reduce the trial and error approach of doing business. You will be able to manage your business with purpose and perhaps precisions; you will know what to do per time and how to handle challenges and growth.

So if you want to start your own bank, you are required to write a detailed business plan that can pass reality test when subjected to it; you should work with the facts, figures and other indices in the industry as it applies to the locations you intend opening your bank.

The whole idea of writing a business plan is not just for the sake of having a business document in place; but a detail guide on how to effectively run your business from the scratch. Your business plan should outline and cover strategies on how you intend to manage and grow your bank.

The rule of thumb in writing a business plan is to try as much as possible to be realistic and never to over project when putting figures on income and profits et al. As a matter of fact, it is safer to underestimate when writing a business plan so that you won’t be so disappointed when reality sets in.

These are the key areas that should be covered in your business plan;

• Executive summary and Company’s descriptions: you are expected to write about the concept of your business, descriptions of your company, your company’s vision statement, mission statement and where your company will be located and also if you intend selling out franchise or opening outlets in different cities in the United States of America and in other parts of the world.
• Other key components that should not be missing in your banking business plan are product offering, SWOT analysis, competitive analysis, marketing and sales analysis / strategies, target market, market goals, pricing, costing and financial projection, publicity and advertising strategy, expansion and growth strategies, budget and start – up capital generation et al.

How Much Does It Cost to Start a Bank?

The cost of starting a bank is in the two fold; the cost of setting up the office structure (including branches) and of course your capital base. For example, if you have a capital base (Tier 1 Capital) of 10M you can only accept a deposit up to $100M. So the nature and size of bank you are looking towards starting will determine the amount you are expected to raise.

As regard the cost of setting up the office structure, your concern should be to secure a good office facility in a busy business district; it can be expensive though, but that is one of the factors that will help you position your bank to attract the kind of customers you would want to do business with.

When it comes to starting a small scale bank perhaps a micro finance / community bank, the following expenditure should guide you;

• The Total Fee for incorporating the Business – $750.
• The budget for insurance policies, permits and license – $10,000
• The Amount needed to acquire a suitable Office facility in a business district with 6 months’ rent up – front (Re – Construction of the facility inclusive) – $50,000.
• The Cost for equipping the office (computers, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – $5,000
• The Cost of Launching your official Website – $600
• Budget for paying at least 10 employees for 3 months and utility bills – $200,000
• Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $2,500
• Capital Base – 10 Million Dollars
• Miscellaneous – $10,000

Going by the report from the research and feasibility studies, you will need about 1.5 Million U.S. Dollars to set up a small scale (community or microfinance) bank in the United States of America. You will need over 50 Million U.S. dollars to successfully set – up a medium scale bank.

If you are considering starting a large scale bank (investment bank, mortgage bank and merchant bank et al) with several branches in key cities in the United States, then you should look towards budgeting well over 100 million United States dollars.

14. Raise the Needed Startup Capital

Starting a bank is usually not a business that an individual can go all the way alone, there is always need for you to invite business partners / investors that will pull cash together simply because the amount required to start a bank is to a joke.

Here are some of the options you can explore when sourcing for start – up capital for your bank;

• Raising money from personal savings and sale of personal stocks and properties
• Raising money from investors and business partners
• Sell shares to interested investors
• Applying for Loan from your Bank / banks
• Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
• Source for soft loans from your family members and your friends.

15. Choose a Suitable Location for your Business

Location is a key factor that contributes to the success of any business. If you make the mistake of choosing a wrong location for your business, you are likely going to struggle to grow the business and if care is not taken, you might end up closing shop due to lack of patronage.

So if you are looking for a location to start, you bank, then you should be willing to pay experts to help you conduct thorough feasibility studies and market survey; they should go out there to carry out research.

No doubt one of the suitable locations for a bank is place with healthy and thriving business activities; a place where there is steady cash flow. Places like market, commercial centers and business districts et al are suitable to locate a bank.

These are some of the factors that you should consider before choosing a location for your bank;

• The demography of the location
• The nature of business activities in the location
• The purchasing power of the residence of the location
• Accessibility of the location
• The numbers of banks in the location
• The local laws and regulations in the community / state
• Traffic, parking and security et al

16. Hire Employees for your Technical and Manpower Needs

If you are considering starting a bank, then you should look towards hiring ICT experts to help you develop your own software application, secured internet platform and online payment system (online banking et al), good mobile banking system and secured ATM cards, ATM machines and POS machines et al.

These are some of the technical stuffs that you must be ready to sort out before successfully launching your bank. You should also consider installing security devices (security doors and CCTV cameras et al) all around your banking facility.

When it comes to choosing between renting and leasing an office space, the size of the organization you want to build, and your entire budget for the business should influence your choice. If you looking towards running a standard bank, then you should consider the option of leasing or outright purchasing of a facility for your bank; when you lease or buy over a property, you will be able to work with long – term planning.

If you are looking towards starting your bank you should be ready to hire only the best hands that you can find in the industry to occupy key management positions. You can hire trainees to occupy some of the lower positions as long as you will make room for adequate training for them.

On the average, you are expected to have some key roles occupied by experienced professionals. Key roles such as Managing Director, Financial Controller, Branch / Bank Manage, Banking Officers, Marketing Executives, ICT Manager, and Customer Relation Manager et al

The Service Delivery Process of the Business

As regard the production process involved in the banking industry, there are variations and it is dependent on the type of bank that you choose to run.

For example, if you choose to run a commercial bank, then whenever you open your bank for business, you are expected to have customers come in to deposit cash, to make withdrawer or to transfer cash et al. This is the regular activities that take place in a commercial banking hall.

17. Write a Marketing Plan Packed with ideas & Strategies

What keeps the banking industry growing is the innovation and products they have to offer. Starting and running a bank requires aggressive marketing. Little wonder those in the marketing unit in the banking industry are the type of employees that are easily promoted when they meet and surpass their targets.

So to stay afloat in the banking industry, you must be ready to spend good cash in advertising and promoting your bank. Your marketing and advertising departments must come out with new innovations and products that can catch the attention of your potential clients.

So when you are drafting your marketing ideas and strategies for your bank, make sure that you create a compelling personal and company’s profile which must include the profile of your board of directors and management team. The truth is that if you have honest, trustworthy and successful professional in your board, customers can easily trust you with their hard earned money.

Here are some of the platforms you can utilize to market your banking business;

• Introduce your business by sending introductory letters alongside your brochure to investors and corporate organizations
• Advertise your business in relevant business magazines and make yourself available for banking related talk shows and interactive sessions on TV and Radios)
• List your business on local directories / yellow pages (both online and offline)
• Attend expos, seminars, and business fairs et al
• Leverage on the internet to promote your business
• Join local chambers of commerce around you with the main aim of networking and marketing your bank.
• Engage the services of marketing executives and business developers to carry out direct marketing

18. Develop Iron-clad Competitive Strategies to Help You Win

No doubt the competition in the banking industry is on the high side in the United States of America and perhaps in most countries with loads of banks. So if you intend building a strong and healthy bank, then you must come up with creative strategies to outsmart your competitors in the industry.

First and foremost, you must ensure that your customer services delivery is top notch; the truth is that customers will always troop to any place where they are certain that they will get the best of customer services. Aside from top notch customer services, you are also expected to ensure that your systems and processes are seamless and efficient especially if you are involved in online banking and mobile banking.

19. Brainstorm Possible Ways to Retain Clients & Customers

If you want to remain competitive and continue to increase your customer retention, then you must be creative and always look for ways to outsmart your competitors in the industry. As a matter of fact, if you can successfully close your back doors and ensure that you retain a minimum of 60 percent of your customers, then your business can be said to be healthy and thriving.

Some of the possible ways you can increase your customer retention is that, you must work towards giving out incentives to your clients via promos and freebies et al.

Your customer services must be top notches and Your CRM software applications must be effectively maximized so that you will be in touch with all your customers.

20. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

The banking business just like any other business requires media hype to get people to buy into the brand. Your brand has to do with the way people perceive you to be which is why you should be deliberate when it comes to communicating and promoting your brand.

In promoting your brand and corporate identity, you should leverage on both print and electronic media. As a matter of fact, it is cost effective to use social media platforms to promote your brands, besides it is pretty much effective. Here are the platforms you can leverage on to create brand awareness of your bank and to promote your corporate identity in the market place;

• Place adverts on national TV stations, Radio Stations and Newspapers / Magazines
• Run your own special TV program
• Sponsor relevant community programs
• Leverage on the internet and social media platforms like; Instagram, Facebook , Badoo, YouTube, Twitter et al
• Install your Bill Boards on strategic locations
• Engage in road show from time to time
• Distribute your fliers and handbills to targeted areas from time to time
• Send out introductory letters to multinationals, embassies, and Diaspora organizations and networks in and around your location
• Encourage the use of word of mouth especially from loyal customers
• Ensure that all your vehicles are branded with your company’s logo
• Ensure that all your employees wear your branded shirts once in a week during work hours

21. Tips for Running your Bank Successfully

The truth is that, irrespective of the kind of business you run, your ability to get all the members of your team on same page at all times is one of the keys you need to successfully run the organization.

As the chief executive officer or president of a bank, it is you responsibility to give direction to the business. Part of what you need to do is to ensure that you create time for office meetings; a time where challenges, feedbacks, projections and relevant issues are discussed. The meetings could be daily, once in a week, twice a week or once in a month. The bottom line is that there should be consistent meetings in your organization.

Carrying out appraisals on a regular basis and training your employees will help you run your organization effectively. Encourage your employees to pursue certifications in their various area of specializations; it will help your organization’s profile and of course it will help the individuals. You can choose to fully or partially sponsor some of the certifications.

Lastly, you should keep your doors open for suggestions from members of your team and your clients. It is very important to reward excellent performance in your organization; it will go a long way to encourage healthy competition in your organization.