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Business Banking: What Every Entrepreneur Should Know Before Getting Started

The best business banking products for new SMBs.

Compared with creating new products, designing an online storefront, and making your first sales, choosing business banking products is much less exciting—yet no less important—part of launching an online business.

Despite the importance of understanding things like when to open a business bank account, how to secure a business line of credit, and what to look for in a business banking rewards program, many merchants either overlook these considerations entirely or base their decisions on criteria to what they’d use when choosing personal financial products.

Choosing the right business banking products—and understanding what to look for—is one of the best ways to set your online business up for success from the outset. By considering your business banking needs from the beginning, you can avoid doing a lot of administrative legwork, paying unnecessary fees, and wasting time evaluating competing financial products and instead free up your time to focus on what really matters: taking care of your customers and growing your business.

In this post, we’ll examine a range of business banking products. We’ll look at some of the products you should consider before or shortly after launching your business, and we’ll tell you what to look for in these products and what to avoid.

Types of business banking products

As their name implies, business banking products are financial products and services designed with the needs of businesses in mind. These products are often similar to those aimed at individuals but have different eligibility criteria, interest rates, and other terms that differ from those of standard financial products.

For most online merchants, banks that offer these products are known as retail banks. These are distinct from investment banks, which are often much larger than retail banks and typically serve institutional investors, such as hedge funds and entities operating in capital markets.

Common business banking products include the following:

  • Business bank accounts
  • Credit and debit cards
  • Online business banking
  • Lines of credit, such as loans and equipment financing
  • Cash management services
  • Payroll services

No two businesses are exactly alike. Even two businesses operating in the same market may have very different banking needs. That said, most online merchants can benefit from some basic business banking products—but only when the terms are right.

Let’s take a look at some of the most common business banking products, the things to look for, and the things to avoid.

Business bank accounts

One of the most important business banking products is a business bank account.

The main reason you should have a business bank account is to keep your personal finances entirely separate from your business’s finances. That might sound obvious, but many merchants fail to open a business bank account when launching their ventures, only to discover that separating their business’s finances further down the road is difficult or even impossible.

Maintaining a single bank account for both business and personal transactions can also cause problems such as greater tax liabilities and other complications. This can be more than a major headache—it can be a potentially significant legal problem.

Another reason you should open a business bank account is that doing so can help legitimize your business in your own mind. Many first-time business owners find opening a dedicated account for their venture can help their business “feel” more real, which, in turn, can strengthen their resolve and commitment to making their business succeed.

What to look for in a business bank account

When looking for a business bank account, one of the most important factors is fees. Many retail banks charge various fees for business account holders, but there are many different kinds of fees, and this can have a substantial impact on your business’s finances.

Ideally, you should try to find a business bank account with low or no fees. Most business accounts will levy at least some fees, however, so finding a truly free business bank account is unlikely. Some fees might not appear particularly burdensome at first, but they can soon become expensive when your business begins to make more sales or conduct more transactions.

Some of the most common business bank account fees include:

  • ATM fees: Banks apply these charges to each cash withdrawal (and some balance inquiries) at ATMs. Costs can range from less than a dollar to as much as $3 or more per transaction, which can add up quickly.
  • Cash deposit fees: This type of fee is usually a percentage of the amount deposited beyond the monthly allowance you agreed upon when opening the account. Depending on the bank and the amount deposited, these fees can range from less than 1% to as much as 5%.
  • Monthly fees: Of all the types of business bank account fees, this is arguably the most important. This is how much the bank will charge you every month simply for maintaining an active account. Some banks offer business accounts that don’t have monthly fees, but most do.
  • Transaction fees: Similar to cash deposit fees, transaction fees are charges that banks apply to each transaction beyond an agreed-upon number, which is typically around 100 or so transactions per month. These charges are often quite low—usually just a few cents per transaction—but like ATM fees, they can soon add up.
  • Wire transfer fees: If you plan on allowing your customers to pay via wire transfer, your bank might apply wire transfer fees to these transactions. These are typically calculated as a percentage of the total amount transferred, but some banks offer flat fees regardless of the amount.

Most retail banks will waive at least some of the fees above if you maintain certain criteria as an account holder. This often means having a minimum amount of money in your account at any given time, agreeing to deposit a certain amount of money every month, and other conditions, as in the cash deposit and transaction fee examples above.

Many merchants choose to use their personal bank for their business banking due to convenience and their familiarity with the bank. While this is certainly an option, don’t be afraid to choose a completely different bank (or credit union) if you find a business banking account with favorable terms.

Business debit cards

The next business banking product you may need is a business debit card.

Choosing a business credit or debit card is an important consideration when opening a business bank account, as the two products are closely linked. Different types of accounts offer different types of cards, each with their own bonus or loyalty programs, fees, and other terms. While the specifics of a credit or debit card probably shouldn’t dissuade you from opening a business account with good terms or incentives, it is important when evaluating your options or comparing two otherwise similar account products.

And not every business needs a dedicated debit card.

What to look for in business debit cards

As with business bank accounts, fees are among the biggest considerations.

Ideally, you should try to find a business debit card that does not apply transaction fees. Since you may have to pay monthly fees just to maintain your business bank account, adding transaction fees to debit card transactions on top of maintenance fees adds insult to injury.

In the event you need overdraft protection on your business bank account, look into whether debit card transactions over and above your agreed-upon withdrawal limit will incur additional fees. Some banks charge for the privilege of guaranteeing overdraft payments and fees for card transactions, so be sure to look closely at the terms of the cards you’re considering.

Aside from fee structures, security measures are another important factor when choosing a business debit card.

Stay away from cards that do not feature chip-and-PIN technology. These chips are common across most kinds of debit cards, but some banks still offer business debit cards that lack this security feature. Although this technology is still an imperfect security measure, it’s considerably more secure than traditional signature verification.

Online business banking

Regardless of what kind of business bank account you choose to open, online banking is a must.

For business owners, online banking is about more than mere convenience. It’s also about having the ability to quickly and confidently respond to changes in the business environment.

Although most retail banks and many credit unions offer some degree of online banking features, there’s a huge range in these products in terms of quality, which can make choosing a bank or account even trickier. Here are some things you should look for when evaluating banking products.

What to look for in online business banking

Not all online banking products are created equal, so it’s worth looking closely at the features before making a decision.

One of the most important considerations for choosing a business banking app is how quickly or how often a bank’s app updates. Some banks’ apps reflect deposits and withdrawals almost immediately, whereas others can take 24 hours (or even longer) to accurately display account activity.

Unfortunately, very few banks will be keen to advertise the fact that their app takes a long time to update, which means you’ll probably have to rely on user reviews to evaluate this aspect of an online banking app. User reviews on the Apple App Store or the Google Play Store for Android devices can be a good starting point, but neither platform is immune to falsified or paid user reviews, so be sure to look into an app thoroughly by checking reviews from multiple sources before making any decisions.

When it comes to basic functionality of a business banking app, it’s also worth choosing a bank or account that offers more than simple online balance inquiries.

Online check deposit using your mobile device’s camera, for example, can be a real time-saver. You really shouldn’t have to waste precious time standing in line at a bank branch just to hand a clerk a piece of paper when you could be using that time to take care of your customers. Integrations with contactless payment methods such as Apple Pay and Google Pay may also make your business banking life easier, as can integrations with other accounts you may hold at the same bank, such as a personal checking account.

Finally, security is an important factor when choosing a business online banking product. Your mobile device has built-in security features that can help keep your account data secure, but be sure to look into additional security features, such as dedicated two-factor authentication, as well.

Business banking that’s right for you

Nobody knows your business like you do, which means that choosing the right business banking products can be challenging. This is made all the more complicated by the fact that most retail banks often have a vested financial interest in making the finer details of their business banking products as opaque as possible.

Before making any decisions, be sure to identify the features and services that you need in order to take care of your customers. What one business considers essential may be an unnecessary luxury to another, so take care to examine business banking products through the lens of your goals and how you want to run—and grow—your business.

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