Proper financial management is key to the success of any business, and there are many factors that make banking for small businesses unique. To set your small business up for success, it’s important to approach finances strategically and select a banking partner whose offerings and business practices align with your company’s goals.
Keep Personal and Business Accounts Separate
Depending on the nature of the small business, it can be tempting to simply utilize your existing personal bank account for the business finances as well. However, maintaining separate accounts for business and personal assets is a wise business practice. In addition to keeping finances above board by clearly distinguishing between business and personal expenses, having separate accounts can simplify tax filings and record keeping while setting the business up for long-term success.
A big advantage to having business-specific banking accounts is to help the business establish its own credit history. Business credit ratings can come into play when applying for loans to finance new equipment or expand operations, and can even be evaluated if businesses bid on contracts or shop their services to potential partners. It’s a smart move for small business owners to take specific steps to establish business credit before they need it, and having a bank account that allows your business to build its credit history is a great place to start.
Factors to Consider When Choosing a Bank
To select the best business bank, a strategic look at your small business goals and objectives is needed. While it makes sense to consider any bank that you have existing relationships with, it’s also wise to cast a broader net. Business banking needs are different than personal banking needs. Additionally, not every financial institution caters to small business banking, and those that do may not mesh with your specific situation.
Before considering individual banks, start by thinking through available features and options to decide which combination best fits your needs. Choices to consider include:
- Fee Structure: Choosing a bank with no or low fees can help keep more money in your pocket. However, sometimes fees are indictive of more banking features or higher interest rates, so do your homework and look at all the information before you decide. If you will be using a credit or debit card, be sure to check out those fee structures as well.
- Location: There are many circumstances—such as making regular cash deposits—that make having easy access to a bank branch or ATM necessary. In other cases, businesses can conduct their banking completely online. If regular in-person or ATM transactions will be needed, make sure to narrow your banking options to ones that are local.
- Loan Options: If your business is in a state of growth, banking with an institution that offers small business loans with reasonable interest rates could come in handy.
- Interest Rates: Businesses with cash reserves may be able to increase their profitability by choosing a bank that offers high interest-earning accounts. Be sure to evaluate interest rates against fees to understand the complete picture.
Here is a list of questions to help you determine the best bank to open a business account for your small business’ needs.
Bank Options for Small Businesses
When it’s time to select a bank, there are plenty to choose from that serve small business needs. Here are some institutions that are considered among the best bank account for small business:
- For businesses looking to minimize fees, Capital One is a good option to consider. According to their website, Capital One offers checking accounts with unlimited fee-free transactions as well as reward-earning cards with no minimums or expiration dates. Capital One offers free business bank account options as well with free online bill pay, mobile check deposit, and online and mobile banking.
- Credit unions offer an option to traditional banks. As cooperative, nonprofit, member-owned financial institutions, credit unions disperse money back to their communities or owner members. For small business owners, this can mean better loan rates and the positive feeling of supporting a local community. One credit union option for small businesses is Digital Federal Credit Union, which, according to their website, offers free business checking and savings accounts that are interest-earning.
- As the name implies, Lending Club offers small business loans up to $500,000, as stated on their website. Additionally, their services include interest-earning business checking and a suite of online tools.
- nbkc bank provides free business checking accounts that can be opened online. While the bank does have a handful of physical locations in the Kansas City area, it primarily caters to customers who prefer online banking. They also offer loans and credit card options.
- For customers who prefer physical locations, Wells Fargo has the biggest U.S. presence with approximately 4,900 branch locations and 12,000 ATMs across 37 states (per the Wells Fargo website at the time of publication). Additionally, Wells Fargo offers various account options, loans, credit cards, and merchant services.
- Another institution known for its brick-and-mortar locations, Chase boasts 4,700 branches and 16,000 ATMs across 48 states (per the Chase website at the time of publication). With its wide range of account options as well as credit cards, merchant services, and loans, Chase can be a competitive option for businesses looking to bundle services with one institution.
With so many different features and options to choose from, there are many potential good banking account matches for each small business, so shop around to find the right fit.
Additional Resources for Small Business Owners
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