What to Consider When Opening a Business Bank Account

Opening a business bank account is an important step in your professional journey. Not only does it allow you to establish your business as a professional, independent organisation, but it also offers a variety of opportunities that would otherwise be unavailable to you if you were to continue to operate your business through a personal account.

For instance, as a business bank account holder, you may be eligible for bonuses offered to customers during introductory periods. Furthermore, business bank accounts tend to offer business-specific credit card or financing options that would otherwise not be available by means of personal accounts.

There are plenty of different reasons why it’s beneficial for your business to have a properly established business bank account, but that being said, there is also a variety of considerations to take into account when opening an account.

Business bank accounts to consider include:

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3. Tide

When Should You Open a Business Bank Account?

While there are plenty of reasons to have a business bank account, not every business necessarily needs one. That is, small businesses with only a few (or no) employees and the occasional transaction probably don’t need business bank accounts. It would be possible and probably easier to simply continue operating from a private account.

However, as your business grows, you hire more employees and the financial side of things becomes more active, the necessity of having a business bank account becomes more relevant.

A few indicators that you need to open a business bank account include:

• Your business has employees and you plan on hiring more staff.
• The business is run by more than one person (not family or a spouse).
• It’s an Incorporated Business (in the USA) or something similar, depending on where you’re based.
• You need a business loan or you may need one in the near future.
• Your business needs to be able to accept credit card payments.

These are just a few of the most important signs that it’s probably time to make a move from a private bank account to a business account.

So, if you’ve decided that you’re ready to start working with a dedicated business bank account, here are 6 things to properly consider before you dive right in.

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6 Things to Consider When Opening a Business Bank Account

Opening a business bank account is a significant step in your professional journey, and it’s important that before you go ahead with it, you’ve properly contemplated your needs, what different types of accounts and banks have to offer you and how those two things potentially line up.

These are 6 of the most important things to consider when opening a business bank account.

1. The Fees, Requirements and Interest Rates

All bank accounts, including business bank accounts, charge account holders specific fees for operations, and along with those fees come a series of requirements that need to be adhered to.

Some of these fees include deposit fees, ATM fees, early termination fees and maintenance fees (on checking accounts).

• Deposit Fees: Often, there are limits placed on the amount of money that can be deposited within a month, and if you exceed those limits, deposit fees are implemented.
• ATM Fees: Many banks charge standard fees for withdrawing money from ATMs.
• Early Termination Fees: If you choose to close a bank account before the end of the contract, you may be forced to pay an early termination fee.
• Maintenance Fees: Most banks require account maintenance fees, but these fees are often waivered if business funds exceed a certain amount or if the business owner has other personal accounts with the same bank.

These fees are, in theory, fairly standard. However, they differ from one bank to the next and they have the potential to affect different businesses in varying ways. Thus, it’s important to properly consider what the bank’s policies are and how they’ll affect your business operations.

2. Look Out for Bonuses for New Account Holders

It’s quite normal for banks to offer potential account holders bonuses during introductory periods in an attempt to attract them to the bank in question.

In some cases, this may be a straightforward cash bonus, and in others, it’s more likely to be the wavering of maintenance fees or something similar.

Bonuses offered during introductory periods can be great for business owners, offering them some financial relief and assistance, but bear in mind that the purpose of these bonuses is to get you interested in the bank. So, make sure that you’re sufficiently satisfied with all the bank’s policies, requirements and opportunities and that you’re not simply being distracted by the promise of a bonus or discount.

3. Does the Account Offer Merchant Credit and Processing Services?

Businesses that make sales and accept payments by means of credit cards need to have business accounts with banks that offer merchant credit and processing services.

Now, if the bank doesn’t offer merchant credit and processing services, it doesn’t necessarily mean you can’t make sales. There are third-party processors who offer the service separately, and they also often have lower fees available.

However, when you’re running a busy business, it becomes significantly easier to be able to do everything through your bank. So, if your business is growing or you it seems like growth is inevitable in the future, it’s a good idea to make sure the business account in question allows for merchant credit and processing services.

4. What Are the Business Credit Card and Financing Options?

One of the most useful things offered by banks to businesses is potential financing options, and whether you’re currently looking into business credit cards or business loans, it’s something you should always bear in mind – you simply never know what the future may hold for your company.

Now, business credit cards tend to go hand-in-hand with business checking accounts, and this means that they’re going to offer interest rates and a range of other credit card terms.

Different banks and accounts will offer varying terms and rates, so make sure you have a proper look at these things when considering a business bank account and make sure that the bank you’re considering is offering competitive rates relative to other banks in the market.

5. Are There Limitations on Transactions?

Many types of business bank accounts impose a variety of different limits on users, ranging from withdrawal limits to transaction limits and more. If these limits are exceeded, account holders are charged a penalty fee that is normally just deducted from their bank account.

Limits for business bank accounts, however, tend to be fairly high across the board – significantly higher than private accounts – so this is unlikely to be a big problem, but make sure you check the limits anyway.

6. Is the Account Covered By Banking Insurance?

It’s become increasingly important for banks and bank accounts to be insured, and this is even more relevant for business accounts that are holding a significant amount of money.

The specifics of how banking insurance works and who controls it will differ from one country to the next, but generally speaking, most countries have national bodies that provide financial institutions with insurance for all types of deposits.

For instance, in the United Kingdom, account holders are protected by the Financial Services Compensation Scheme (FSCS), whereas in the United States, it’s the Federal Deposit Insurance Corporation (FDIC).

Whatever the case may be, it’s essential to confirm that the bank you’re hoping to open an account with is insured by the relevant institution.

Selecting the Right Business Bank Account For Your Company 

Opening a business bank account is a big step forward for most business owners, and it means the start of having to ensure that all regulations are being followed and that you’re getting the most out of the financial institution in question.

Different businesses have varying needs based on their size, industry and more, so it’s essential that all the different aspects of banking are taken into account.

From the specifics of interest rates and processing fees to insurance options and financing offerings, it’s always a good idea for business owners to shop around, consider their options and make informed decisions.