Opening a bank account for your business that’s separate from your personal one is an essential element to your business success. This is especially true for small business owners who find it tricky to designate their funds accordingly.
However, while opening a bank account is pretty straightforward, the process does get a bit more complicated if you’re getting one for your business. For one, it requires more thought, research, and planning especially during times like this!
How Businesses and Banks Relate to Each Other
At the very least, you want a bank account that can support both your short and long-term business goals. Does your chosen bank offer an option to upgrade your account should your funds grow? Does it offer business loans just in case you want to expand your online operations into a brick-and-mortar one in the future? And what about the rates that they offer to small businesses, is it the same for bigger companies?
Choosing Your Bank Wisely
One of the first steps on how to start a business is to come up with a business plan. Use this plan not just as a blueprint for your business, but also as a guide on choosing the bank that’s perfect for your needs and preferences.
There are two factors in particular that you should take a closer look into: the services and bank products that they offer for businesses, and the bank fees that you can expect.
Top Banking Services for Businesses
Let’s start with the services. Here are four:
Business Checking With Interest
Every business, big or small, needs a checking account. However, unlike big businesses, smaller enterprises might not be able to cover the high minimum balance requirements that most banks offer.
Hence, make sure to compare between different banks in order to secure the lowest maintaining balance possible that rewards financial responsibility with substantial interest rates.
Your checking account is not the only financial product that you have to juggle. You need to stay on top of your wire transfers, bill payments, automated collections, and more. Fortunately, if you have all your accounts under one roof, there is a service called treasury management.
It’s the combination of handling multiple accounts under one “treasury” by a single financial establishment. It’s not only convenient but really practical for record-keeping purposes.
Business Credit Card
Regardless of how you carefully budget your funds, there are still some instances that you simply can’t predict. Expenses that sprout out of nowhere. Purchases needed to be done. Opportunities that are too good to pass.
This is where a business credit card can be really handy. Choose one that allows you to earn rewards with each purchase to maximize your spending.
Money Market Accounts
Finally, you need a product that will give you some security. Your business is already an investment on its own, however, wouldn’t you be able to attain your financial goals faster by reinvesting your profits into another equally profitable investment?
A money market account will allow you to reinvest your business money and make that money work for you as well. There’s also very low risk involved because you have access to your money at any time. In fact, you can even link it to your checking account.
Now, there are definitely other banking services out there that will benefit small business owners like you, but the ones that we have mentioned above are a good way to get started. Here’s one last tip: regardless of which service you choose, it’s going to be really convenient to get mobile banking access. We understand how hectic your schedule is being business owners ourselves, so we know how practical it is to have your bank in your pocket.
Common Bank Fees
Since we’ve covered the services already, let’s move on to the most common bank fees. We have divided this part into two categories: fees that are frequently paid by individuals, and those that are usually encountered more often by business owners.
- ATM Fees. This is probably the most common fee that individuals handle. This is paid when you use an ATM that is not affiliated with your bank. The best way to minimize these fees is by withdrawing larger amounts so you won’t have to do multiple transactions, or just sign up with a bank that has a wide range of affiliated ATM networks.
- Inactivity Fees. This usually applies more frequently to individuals rather than business accounts, especially since the latter usually has more activity. This is required when an account lays dormant in order to cover the maintenance costs. The best way to minimize these fees aside from using the account regularly is to make sure that your balance falls above the required maintaining balance.
- Hard Copy Statement Fee. Finally, if you haven’t gone paperless yet, then you should know that your bank is charging you for the administrative and postage costs of sending over your monthly banking statement as well. Yes, it’s not free. What is free is viewing live updates of your account online through online banking.
- Checking Account Fees. Since entrepreneurs usually use checking accounts more frequently than other individuals, it’s not a big surprise that they shoulder more checking account fees too. These are service fees that are usually applied per transaction. There are banks that offer free checking accounts, though, so make sure to research your options if you wish to skip this unnecessary spending.
- Excess Transaction Fees. Speaking of fees applied on transactions, there’s also a fee applied for exceeding the maximum number of monthly transactions that you can make per month, something that can be very easy to overlook if you own a bustling small business with almost daily transactions.
- Overdraft Fees. Another thing that can be easy to overlook aside from the number of transactions is the money involved as well. Fortunately, there are banks that offer overdraft coverage. It allows payments to still go through even if you don’t have enough funds in your checking account anymore, but of course, with a fee. In any case, the best way to avoid needing overdraft coverage, to begin with, is by signing up to get low-balance notifications on your phone.
Again, much like the banking services we have shared with you earlier, there are certainly other bank fees that you may encounter out there, both as an individual and as a small business owner. It’s best to consult your bank’s representative in order to learn more about them, especially those that particularly apply to the accounts you own (or wish to own).
Opening a business bank account is a solid step towards financial success even for small business owners. They can help you attain both short and long-term business goals.
Don’t just open a separate account, though. Put more thought into it. Choose your bank wisely.
Make sure to explore the various services that your bank has to offer. Opening a checking account, getting a credit card, investing in a money market account, and signing up for treasury management services are but some of the services that you can consider.
Finally, inform yourself about the most common banking fees that you can expect with the accounts and services that you sign up for. In this way, you won’t get blown away with “hidden costs” and can plan your expenses and savings more wisely.