The services that banks provide are an important part of managing your small business's day-to-day operations. From checking and savings accounts, to payroll services, to loans and lines of credit, your bank can provide solutions for virtually all of your small business's financial needs.
The question is, what's the right business account for you? Learn what small business banking can do for you, and what to look for when choosing a bank.
What is Small Business Banking?
Personal banking is what you use to manage your personal finances; corporate banking serves larger companies and corporations. Small business banking lies somewhere in between these two.
Small business banking refers to banking services and products designed for small and medium-sized businesses. Banks and credit unions often have special divisions just for their small business clients.
The small business banking products and services umbrella typically covers:
- Payroll and record management
- Tax services
- Invoicing and payment services
- Deposit accounts, including checking and savings
- Business credit cards, loans, and lines of credit
- Security and fraud prevention/protection
- Retirement accounts and/or Health Savings Accounts
Small business banking is meant to address the tasks you need to handle in order to keep your business running smoothly daily, weekly, and monthly, while also helping you plan for the longer term.
Opening a Small Business Banking Account
There are a few pieces of information you'll need to open a small business bank account. Depending on the bank, you may be able to open a business account online. If not, you'll need to visit a branch to meet with a banker.
Getting organized ahead of time can make the process smoother. The basic information you'll need to open a business account (online or otherwise) includes:
- Your Social Security Number or tax identification number
- A photo ID
- Business license or "Doing Business As" registration
- Partnership agreement or articles of incorporation
You'll also need funds for your initial deposit. If you open a business account online, you should be able to schedule an electronic transfer from another bank. If you're opening an account in person, a certified check may be preferable.
How to Find the Right Business Account for You
The bank that works for one small business may not be right for another. Keep this checklist handy as you compare your small business banking options:
- Start with banking products.
Newer businesses may be fine with having only a checking account but, if your business is more established, you might want to cast the net wider. You may need a savings account, for instance, for emergency cash reserves, or you may want a business credit card for earning rewards while managing business expenses.
- Review business services and tools.
Handling basic housekeeping duties — such as sending out invoices, running payroll, or reviewing accounts payable — can be tedious, not to mention time-consuming. Having these services available through your bank helps you streamline these processes and focus on other things.
- Do the math on fees.
Keeping an eye on the bottom line is a priority, so review the fee schedule for any business bank account you're considering. Specifically, check for things like monthly maintenance or minimum balance fees, as well as any fees associated with individual banking services.
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Compare APY and APR.
Annual percentage yield, or APY, is the rate of interest you earn on deposit accounts; the annual percentage rate, or APR, is the interest you pay on loans, credit cards, or lines of credit. If you want to open a business savings account or apply for a loan, compare APY and APR to see which banks offer the most competitive rates.
- Check banking access and service.
When you're busy with your business, you want to be able to access your bank accounts and get answers to questions with minimal hassle. Having mobile check deposit, online banking services, and a personal relationship banker available can help take the stress out of managing your business banking.
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Explore financing options.
Different types of financing can help your business meet different needs. A business credit card can be useful for everyday purchases or travel, but a term loan may be more appropriate if you need to buy equipment. Consider the range of financing options offered, the amounts you can borrow, what purposes loans can be used for, and the minimum requirements to qualify for financing.
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Look for relationship benefits or perks.
Some banks offer additional incentives to small business banking customers, such as a cash bonus for opening a new account or the opportunity to earn rewards. While that may not be as important as getting a great rate on a loan or paying minimal fees, it's still worth researching.
Remember, small business banking isn't one-size-fits-all. Ultimately, the right business account—and the right banking relationship—is the one that helps you handle all the banking tasks on your to-do list, while delivering exactly what you need in terms of pricing, convenience, and features.
