10 Things to Consider When Choosing a Business Bank Account

Many small business owners use their personal accounts to manage operations. But, having a business bank account is a more suitable idea. You should have one to prevent mixing up personal and business assets.

10 Things to Consider When Choosing a Business Bank Account

A business bank account provides advantages like higher interest rates and transaction limits. Yet, there are several requirements to open one, such as a big initial deposit. 

Things to Consider when Choosing a Business Bank Account

Whether you are looking for the best bank for small business in florida, New York, or London, here are crucial factors to consider when shopping for a business banking provider. They include:

1. Reputation

The bank’s reputation is a foremost consideration. You don’t want to deal with a bank known for dodgy practices. Read reviews online and ask around from your local social circles. The latter is a more reliable way to get an accurate assessment.

You also want a bank that is in strong financial standing. What's their capital level? How much turnover do they generate each year? Are they adding new customers annually? Read financial statements to get this type of information.

A bank without strong financial standing would experience problems in a recession. Hence, avoid them like the plague. 

2. Size

Bigger isn’t always better, but size tells a good story. Big banks have a lot of branches and tend to offer more resources to customers. You can get a broad range of credit options and perks for opening accounts. 

You can visit other branches of a large national bank when you’re out of state. In contrast, a small community bank keeps you locked in a limited vicinity. If you’re not in your locale but need to resolve a problem, you may just have to wait till you get back. 

3. Fees and Requirements 

Banks usually charge maintenance fees for business accounts. Different banks have varying fees, so shop for what you can afford. Some banks waive their fees if you meet a minimum balance requirement each month, so there's that. Some also waive the fees if you have a personal account at the same bank. 

Some business accounts charge transaction fees if you exceed a specific monthly allotment. You may have to pay termination fees if you close your account before an agreed date. 

The key here is to understand the fees of the banking provider. Look for an option you can easily keep up with.

4. Bonus Offer

Some banks give bonuses to entice customers to open business accounts. The bonus could be cash, perks, or vouchers to spend elsewhere. It could be lower fees for a specified period. 

If you’ve narrowed down your options, it’ll be smart to select the bank providing the most incentives. 

5. Services 

What services does the bank provide? Do they offer both in-branch and online banking? Some banks require physical presence to open an account, while some don't. Opening an account online is more convenient because you can do it anywhere.

Look for a bank with a mobile app that lets you transact from anywhere. It isn't essential, but it's convenient to send funds, pay bills, and check balances from your mobile phone. 

If you're a new business, you may want a line of credit or cash advances. If you plan to accept payments online, you'll need merchant services to process transactions. Some third-party payment processors offer this, but it may be more efficient to use a bank.

6. Interest Rates

Bank interest is no longer the leading investment instrument due to lower rates across the board. But, banks still offer interest and better rates for business accounts. Search for a bank offering higher interest rates than others.

7. Withdrawal Limits

Banks offer different withdrawal limits for business accounts. The limits are usually daily, weekly, or monthly. If your business moves significant sums, it's necessary to pick a bank with a larger withdrawal limit. Doing so will avoid problems in the long run. 

8. Fund Insurance/Protection

Ensure the institution you’re banking with is insured by the domestic central bank or a similar government agency. If not, you’ll lose your funds if the bank goes under.

There’s a limit to the amount the government insures, e.g., $250,000 in the US. If your funds surpass that level, it’s advisable to open multiple accounts at separate institutions to get adequate insurance.

9. Support

What kind of support do you require? Some banks have dedicated staff to help you manage and grow your business. These specialists can offer valuable advice on how to manage operations efficiently. 

Think of how much support you'll need and look for a bank that provides it. You can always find an external specialist, but an internal one will have more insights into your business and finances to give practical advice.

10. Integrations

You may need to link your business account to external software tools. For example, you might use QuickBooks to track expenses and manage payroll. Before opening an account, find out if the bank has integrations with your accounting software. It’ll be easier to manage your business if your bank does. 

And in –°onclusion: Benefits of Having a Business Bank Account

1. Liability Protection

Keeping personal finances separate from your business protects your personal funds. For instance, if you incorporate your business as an LLC, you won’t be personally liable if it can’t pay back its debts. Concurrently, your business's credit score won't take a hit if you suffer a personal financial setback.

2. Easier Tax Filing

Separating business expenses from personal expenses is necessary to take advantage of business tax deductions without inviting an audit. It gives you a clear view of which expenses you can deduct and what you can not.

3. Professionalism

It looks more professional when you issue invoices to clients, and they pay to an account with your business name. This scenario gives the appearance of a serious enterprise and will make customers want to do more business with you or refer you to other clients.

4. Expense Tracking

It's more straightforward to track expenses and monitor spending with a separate business account. Effective expense tracking will help you avoid overspending and running into too much debt or bankruptcy.