Small Business Banking 101

You've had a bank account for years. You can balance your checkbook, apply for a mortgage and manage your budget. Your business, however, has different banking needs. Learn about the important aspects of small business banking.

Most personal banking doesn't require much strategy. People can usually get by with a checking/savings account combo and an extensive ATM network.

But when it comes to your business, you're going to need more. Here's a look at the features and issues you should be thinking about.

Small Business Accounts

For bookkeeping and tax purposes, keeping your business and personal finances segregated is a must. Almost any bank will open a business checking or savings account for you, but they will want some details first. Does your business have a name? Have you registered that name with the state? Make sure you have this information in hand.

Pay close attention to fees. Many banks charge higher fees to businesses than to individuals. Is there a minimum balance requirement? A maximum number of checks you can write each month? Be sure to ask about all charges and restrictions upfront, before opening an account.

Banking Services

Banks are more than just a place to park money. Many offer business services such as investment consulting, payroll, cash management and online banking. What might this mean for you? Here's one example: If you handle invoicing, consider what you'd be willing to pay to automate the task. Then, shop around for a bank that provides those tools. If the tools are convenient and the price is right, you're a step closer to selecting a bank based on service.

The Bank You'll Need Tomorrow

Think about the future banking needs of your business. For example, you may only deal in cash payments today, but the time may come when your customers demand the convenience of credit card payment. To accept credit cards, you'll need a merchant account; if your bank has offered them all along, it will be much easier to set up that account.

Similarly, even if you don't need a business loan now, having an established relationship with a bank will help you start that financing conversation when the time comes.

Large vs. Small

Although big banks have gotten a bad rap in recent years, the wide range of products and services they offer can make them convenient one-stop shops for small businesses. One thing they aren't known for, however, is flexibility. If you need some wiggle room on fees, interest rates or payment schedules (as small business people often do), you're unlikely to find anyone at a large bank with the authority to negotiate with you.

Smaller banks are often sensitive to economic conditions in their communities. In general, they can understand the pressures on your particular business better than large national banks. And if you require face-to-face service from a bank officer with the authority to help you out in tough situations, you're much more likely to find that at a smaller community institution. Technological advances have also made it possible for modestly sized banks to offer services (like online banking) once available only from large chains.


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