One of the most essential decisions you’ll make when beginning a business is which bank to choose for your business bank account. Yes, a business bank account is required. It’s not a good idea to mix personal and business funds. Individuals who do this are frowned upon by the IRS, and you may find it difficult to prove which money are personal and which funds are business-related if you are ever audited.
You can be thinking in your head that a bank is a bank. Sure, all banks execute the same basic activities, but some banks provide additional benefits, particularly for corporate accounts. When shopping for a bank, bear in mind the services provided, cost, and technology.
We’ll go over a few options for selecting a bank for your small business account here.
How can the bank best meet the needs of your small business?
Your banking requirements take precedence over your desires. Before deciding on a bank, inquire about what the bank can do for your small business. What particular offers/benefits do you have access to? How much do your business bank account transactions cost in terms of bank fees? Banks are notorious for hiding fees and other costs; as a result, it’s a good idea to ask questions up front and read the bank’s brochures, or at the very least, skim through them and read the sections relevant to the type of business account you’re considering opening.
Banking Transactions
Deposits
Check to see if the bank permits you to deposit money via a smartphone app or other electronic means. It’s far more convenient to use a smartphone app or another electronic option than to drive to the bank every time you need to make a deposit. You should also verify if there is a monthly limit on the number of deposits you may make to the account. It may seem unusual that a bank would charge you a fee for making too many deposits, but believe me when I say that some banks do.
Withdrawals (electronic and manual)
Ask the bank representative if the amount of withdrawals you can make from the account each month without incurring a fee is limited. Because this is a corporate bank account, it’s unlikely that you’ll be withdrawing money on a frequent basis. However, knowing this information is beneficial.
Transfers
Ensure that electronic transfers and direct payments to your bank account are simple to initiate and receive. You should also find out if there is a monthly limit on how many direct deposits or electronic transfers you may make without incurring a cost. Granted, the direct deposit feature may not be necessary for most small enterprises. However, as an independent contractor, freelancer, or other self-employed person, you may require the direct deposit option. You should find out whether there are any fees associated with any of these services up front.
Let’s take a look at some of the fees associated with small business bank accounts. It’s worth noting that the fees for corporate accounts are higher than those for personal accounts. Even if the account is nominally free, if you do not adhere to the account’s requirements, you may be subject to monthly costs. Because banking costs might vary greatly, you should read the tiny print to understand what type of account you have and what the account’s criteria are.
Some banking fees that you can be charged for are as follows:
- Insufficient use of the bank account;
- Failure to maintain the required minimum account balance;
- Exceeding the monthly limit on deposits and withdrawals;
- Fees for insufficient funds (NSF). Some banks waive the first one or two non-sufficient funds charges for account holders. After then, the cost is usually $35 per non-sufficient funds incidence. It’s easy to see how $35 may easily build up. You should make sure that if you write checks from a business account, you have enough funds in the account on the day you write the check. Checks can now be cleared in as little as 24 hours. When you’re just getting started in business, every dollar counts.
You might desire to extend your company as it grows. However, if you want to expand, you’ll need more money. To obtain the money you require, you may be able to obtain a loan or a line of credit from a bank. The following are some critical questions to ask the bank representative about loans and lines of credit:
- What are the prerequisites for obtaining a small business loan?
- What is a small company loan’s interest rate?
- What is the maximum amount that a small business can apply for?
- What are the terms of a credit line?
- Is the bank willing to work with you if your loan requirements change?
When it comes to choosing a bank, size does matter.
You have options when it comes to banking, just like you do with almost everything else. Small local community banks offer customized service and are a fantastic alternative if you want to save money. There are also medium-sized regional banks, which would be an excellent fit for your small firm if it has aggressive expansion plans. There are also huge national banks, which are a fantastic alternative if you want to save money on fees and have access to internet banking technologies. The best promotional offers are usually found at the larger banks.
Each banking option has advantages and disadvantages. You should examine the benefits and drawbacks of each option before selecting whether to go with a tiny local community bank, a medium-sized regional bank, or a large bank.
Below are some advantages and disadvantages for each bank option mentioned.
