Common business banking services and benefits

Financial institutions that offer business bank accounts may also offer you a business loan, credit loan or credit cards. These types of business credit could help you manage your business’s finance. However, always be cautious when you’re borrowing money. Have a plan for how you can effectively use the money and how you’re going to repay the debt before you agree to take out a loan.

Having a business bank account could also be a requirement for accepting non-cash payments, including debit cards and credit cards. The bank that you open your account with may help you get set up to accept cards. However, you could be better off comparing your options to determine which merchant services provider will charge you the lowest fees.

In the U.S., the Federal Direct Insurance Company (FDIC) insures most banks and will cover the first $250,000 you keep at each bank. If the bank fails, the federal government will reimburse your covered funds. Opening an FDIC-insured business bank account could help you keep your business’s money secure when you don’t need cash in your register.

Choosing a financial institution

Before you open your business bank account, you may want to compare what’s offered by the banks and credit unions in your area and by online banks to determine what financial institution and products are right for you and your business.

Checking and savings accounts
As with personal accounts, a business can open a business checking account and savings account. The checking account can be for receiving payments and covering operational expenses (i.e., everyday expenses, like buying supplies or paying employees).

The savings account can be for long-term savings and projects. Even small businesses that don’t have a lot of money to spare can slowly start building a business emergency fund to help them get through tough times.

Keeping your savings in a separate account could make it easier to resist using the money for day-to-day expenses. Plus, savings accounts tend to offer a higher interest rate than checking accounts, which can help you earn more money with your savings.

Comparing your options
Even if the company you use for your personal banking also offers business accounts, you may want to look around to see if it’s actually the best fit for your business. Once you compare your options, you might find that a different financial institution will actually work better.

The following are some of the things you could compare as you’re looking at different accounts:

• Monthly transaction limits or requirements: Business bank accounts may charge fees based on the number of transactions in your account, how many checks you write, how many checks you deposit or how much cash you deposit each month. Try to find an account that meets your business’s needs without a fee.
• Fees: Accounts may have different fees associated with them, such as a monthly maintenance fee that you may have to pay if you don’t maintain a minimum daily or monthly account balance, or fees for withdrawing cash from an ATM. These fees are sometimes avoidable, but it is important to be aware of them and understand how best to manage them in order to avoid unwanted costs.
• Features: There could be different features and services to compare, such as being able to deposit a check with a smartphone, use a mobile banking app or easily connect your account to your business’s accounting software. For online businesses, being able to integrate your bank with the front-end retail store helps you manage all aspects of your business. See Digital Payments.
• Interest rates: You may be able to earn interest with either a checking or savings account, although savings accounts generally offer a higher interest rate. Compare the rates for both types of accounts from different banks.
• Access to your account: If your business frequently needs small-denomination bills or change, being near a bank branch could also be a matter of convenience. It’ll be much easier to manage your day-to-day operations if you don’t need to travel far to visit the bank. Consider the bank’s branch locations, the branch hours and online banking access.

Online and mobile banking

Many banks offer online banking capabilities and a smartphone app for mobile banking. Once you create an online account, you may be able to easily check your balance, initiate bank-to-bank transfers and pay bills at any time.

Using online banking can also be important for keeping accurate banking records. Many online accounting and payroll systems can be linked to online bank accounts, allowing you to easily share information back and forth. Having all your systems connected could make managing your business’s finances and taxes easier.

There are also online-only business bank accounts, which may be worth considering as an alternative to a branch-based account. Online-only banks don’t have to open and run branches, and they often pass the savings on to customers by having fewer and lower fees. They may also offer a higher interest rate on savings accounts and rewards or interest on checking accounts.

You won’t be able to speak with a banker in person or receive the in-branch services that many business owners need, such as easy cash deposits or getting change. However, if your business doesn’t need these types of services, an online-only account might be a good fit.

You could also use both types of accounts and open a checking account with a convenient branch-based bank, and an online-only savings account to take advantage of the lower fees and higher interest rate.

Keeping your online account safe
For many small business owners, online banking can be a convenient and secure way to manage the company’s finances. However, if you sign up for online banking, you may want to take a few extra precautions to make sure your account remains private and secure.

• Don’t log into your account while connected to public Wi-Fi. Someone else might be able to monitor your online activity.
• Use a unique and strong password. You may have a few passwords you like to use over and over again. Create a brand new one that you only use for your online bank account, and make sure the password is somewhat random (rather than a common word) with a mix of characters and capitalization.
• Opt-in for two-factor authentication. If your bank offers it, sign up for two-factor authentication, which will require you to take an extra step to sign in to your account from an unfamiliar device. For example, you might have to copy a security code that’s sent to your phone or email.
• Be cautious when checking emails. You may receive an email that looks like it’s from your bank or another trusted company, but is actually a trick. These phishing emails may ask you to sign in to your account (they could even direct you to a website that looks just like the bank’s website) or email back personal information, and then use that to log in to your account and steal your money. Ignore suspicious emails, or you can call your bank if you’re unsure about an email you receive. Always use the phone number on the back of your debit or credit card or on the bank’s official website and don’t rely on information from an incoming email. See Security and Fraud.
• Keep antivirus software updated. Make sure your computer has antivirus software, regularly check for software updates and scan your computer for infections. Change your banking password — and other online account passwords — if you find a virus.

Opening a business account

You may need to provide different types of information to open a business bank account than you would a personal account. The exact process can vary depending on where you’re opening your account, but the documents may include:

• Your business’s EIN: An Employer Identification Number (EIN) is like a Social Security number for your business. It can tie your business to tax forms and credit reports, and may be a requirement for opening a business bank account.
• Business formation documents: The bank could ask for your business’s formation documents, such as the articles of incorporation and certificate of organization, which you filed with the state when you created your business.
• Governing documents: You may also have different types of business governing documents depending on the type of business you created. LLCs have operating agreements, partnerships have partnership agreements and corporations have bylaws or resolutions.
• Business name certificates: If you registered a business name with the state, you may need the related certifications or statements.
• Business license: Depending on your type of business and where it’s located, you may need to obtain local, state or federal licenses. You also may need to share copies of these when you apply for a business bank account.

If you don’t have some of these documents, such as an operating agreement, you could create the document (you can look for free guides and templates online) before applying for a business account.

Business owners who operate a sole proprietorship, the default type of business if you didn’t create a partnership, LLC or corporation, also might need to apply for an EIN before opening an account. In some cases, sole proprietors may not qualify for a bank’s business account, but they could still open a new personal account and only use it for business purposes to separate their finances.

Don’t be afraid to switch

Your business bank account should benefit your business and make your job as the business owner easier. If you’re having trouble with your current bank, don’t be afraid to switch to a different financial institution. While transferring all your information and accounts can be difficult, you’ll hopefully be better off once the transfer is complete.