You’ve innovated the perfect good or service, and are ready to share it with the world. You’ve done some research on how to start a small business, and have a good idea of what to expect. But how are you going to handle the money? And what do you look for when choosing the best banks for business accounts?
Banking is an important aspect of managing cash flow for small businesses, and finding a really compatible business bank account is key to optimizing your efforts. In this article we’ll discuss why a business bank account is necessary, how they work, and just what to look for in a business bank account in terms of features and benefits.
Why you should open a business bank account
There are a number of reasons that make opening a business bank account a must. First and foremost, you want to keep your personal account and business account completely separate. This will prevent conflicts of interest. With mingling accounts, you open yourself up to tax issues, and problems with organizing financial forms during tax season. This is especially true if you hire someone to deal with cash flow.
Unclear accounts can also be a problem if you have to deal with a disgruntled vendor, employee, or client. If sued, having your business incorporated will minimize the risk of losing your personal assets, as the business will be considered a separate entity. However, if you are using a personal bank account for business expenses you still run the risk of losing personal money if your accounts are muddy.
Finally, a business bank account demonstrates to your customers that you are a legitimate company, and not just a hobbyist. Having business checks to offer to vendors and suppliers gives an aura of professionalism, while using personal checks comes off as amateurish. From a purely logistical standpoint, you’ll also be able to accept credit and debit payments from customers and clients with a business account.
When you should open a business account
The Small Business Administration, or SBA, recommends that you open a business bank account as soon as you begin to spend or accept money as a business. It’s as simple as that. Therefore, it’s a good idea to begin researching what you want in a business bank well in advance so you aren’t caught without an account.
Pros of opening a business bank account
There are a number of perks to opening a business account, even beyond the main benefits of protection and professionalism. Some of these include:
Extra purchasing power: Having a business credit card account can assist in large startup purchases for your company, as well as establish a credit history.
Merchant services account: This allows you to accept credit and debit payments from clients ultimately benefitting your bottom line.
Line of credit: Most business accounts offer this option, which can come in handy for emergency purchases, or if you need to invest in equipment, stock, etc.
Low fees and added benefits: If you shop around a bit, you’ll find that many banks offer excellent introductory offers, low-interest rates, and other perks to attract customers.
Protection: This has already been mentioned, but really can’t be talked about enough. In addition to keeping your personal assets safe, business banks are equipped to offer protection for your clients as well. Merchant service accounts are extremely safe and protect client information.
What to look for when choosing a business bank account
Make sure that you shop around when looking for a business bank. Things like fees, rates, and options can vary widely from bank to bank, so make sure you get the best benefits, as well as the ones that make the most sense for your business. Here are some things to look for:
Fund Protection: This is a big one: only go with a bank that is FDIC insured to protect your money.
Services available: Does the bank offer a mobile app you can use to pay bills, monitor your accounts, transfer between accounts, and check cash flow? While not essential, this kind of access is a useful thing to have.
For those starting out, having a good line of credit and access to a business credit card can be useful perks. You’ll also need a merchant services account if you plan to take credit card and debit card payments from your customers or clients.
Fees and requirements: Most banks will charge businesses maintenance fees for their accounts, though these might be waived if your business meets a monthly minimum balance requirement. Some banks will also charge transaction fees if you exceed a specified monthly allotment. Also look for minimum deposit or balance requirements. If you shop around and compare, you can find the banks that offer the best small business checking and savings deals.
Different features for different needs: Build your account based on what features your individual company can use. An example of this would be the N1 envelope feature as an independent back up. Think about what your particular needs are, and find a bank that offers what you can use. A line up of fancy features won’t do you any good if they aren’t anything you’d need.
Final thoughts
Setting up a business bank account is such an important part of launching your business, that you should really take some time to find the best small business banks. Safety, protection, and integrity are on the line.
You also want to be sure that you have all of the features that your business will need. So before you begin to spend or accept money as a business, take some time to research banks to find what benefits they offer, as well as compare fees and transaction requirements. This will start your business off on the right path from the very beginning.
