Business Banking 101 (Part 2): Choosing A Business Bank Account
So you read Part 1 in my Business Banking 101 series and you know how important it is to have a separate account for your business transactions. Now you are probably wondering, how do I choose the right account. The first decision you need to make is whether you want a traditional bank/credit union or an internet bank.
A traditional bank is one that has a physical location that you can go to when you need something, such as a cash withdrawal or deposit. I’m willing to bet that your personal funds are at a traditional bank. Traditional banks can either be larger, national banks (Bank of America, Wells Fargo, Chase) or smaller local banks that are just in your hometown or state. When you are looking for a personal relationship with your bank, someone that knows you and your business, someone that can help walk you through financing arrangements or investing options, a traditional bank might be better suited for your needs. Many business owners opt to open their bank accounts at the same bank where they do their personal banking, that is always a great first option.
An internet bank is newer style of bank whereby there are no physical locations for that bank, everything is done online and you are given access to a network of ATMs should you need access to deposit cash or make a withdrawal. Some popular internet banks include Ally, Azlo, Capital One, and Novo. These types of banks are great for business owners that don’t need the personal connection from their banking relationship.
Every business and business owner is going to have different needs when it comes to their business banking relationship so figure out what is most important to you and what you need from the relationship. Gather information from at two or three (or more) different banks on what options they offer to small business owners. When it’s time to evaluate your options, here are a few things to keep in mind to help identify the account that is right for you.
Monthly Fees
One of your goals with your business is to make money right, why would you want to pay a bank to keep your money? The first thing you should look for in a banking relationship is an account with no monthly maintenance fees. Some banks require that you maintain a minimum account balance on a monthly basis in order to not pay maintenance fees.
As long as you can meet that balance requirement consistently every month, that bank could be a good option for you. All banks are required to disclose their fee schedule and provide a complete listing of all of their fees so be sure to review it carefully for any hidden fees.
Services Offered
A business based entirely online will have very different banking needs than a brick and mortar business. For many of my clients that are operating an internet-based business, access to ATMs and branch locations it not necessarily a priority since all of their financial transactions are done electronically.
Start by figuring out what your banking needs are and what services are must-haves for you. Will you be using the bill-pay feature? Do you need the ability send wire transfers or ACH payments? Review the list of offerings and ensure the account has the features you deem essential. If you don’t see something you are interested in, reach out to the bank and ask them, banks are adding new features all the time.
Rewards
When you used responsibly, credit cards can be a great tool for a business. Some cards come with fantastic rewards that allow you to earn cashback on all of your purchases. That cashback can be used to invest in your business and help your business grow.
There are independent companies (Discover, Capital One) that offer credit cards but your local bank may also have a card that has will suit your needs and it may be easier to get approved given your banking relationship.
I hope those tips help you to identify the type of banking relationship you want (traditional bank vs. internet bank) as well as what to look for when evaluating different account options. Let me know what type of bank you use…traditional or internet?