Starting your own business comes with a ton of hurdles you need to clear if you hope to be successful. One of the decisions you’ll need to make along your journey is figuring out where the money you collect from customers will go. After all, collecting payments and making money is a big part of why you’re in business!
Regardless of your industry, opening a business bank account is always a safe bet. But what exactly is a business bank account? Continue reading to learn the answer.
What is a business bank account?
Business bank accounts operate similarly to personal bank accounts, but they’re designed for business transactions instead of your personal ones.
With a business bank account, you can collect payments from clients, distribute paychecks to employees, pay vendors, and use a debit card to make everyday business purchases. As a busy business owner, you’ll want a business account that comes with a mobile app. That way you can bank on the go. Opening an account with NorthOne, for example, makes mobile banking easy and hassle-free.
Anyone who owns a business can open a business bank account. In fact, depending on the type of business you’re starting, you may need to open a business bank account. Fortunately, there are plenty to choose from. You just need to do some research to determine the best type of bank account for your business’s needs.
What are the different types of business bank accounts?
Now that we’ve covered a little bit about what a banking account is, it’s time to learn more about each type of business bank account. Here are a few of the most common types of bank accounts for small businesses:
- Checking: A business checking account is the most versatile type of account. It has the fewest restrictions on what you can do with your money and offers a number of withdrawal options, including ATM and debit card transactions, wire transfers, ACH payments, and checks.
- Interest-bearing checking: The biggest pitfall of a standard checking account is that the money in the account doesn’t earn any interest while it’s in there. If you’d like to earn interest on your deposits, consider opening an interest-bearing checking account. Just keep in mind that the interest is not likely to be anywhere near as high as you’d get with a business savings account.
- Savings: A business savings account is perfect for business owners who have some extra capital to set aside for a rainy day or a big future investment. The catch with business savings accounts is that you’re limited to a small number of transactions each month. Make sure you won’t need any money deposited into the account if you find yourself in a pinch.
What are the benefits of opening a business bank account?
Besides being a necessity for some businesses, having a business bank account has a ton of different perks for businesses of all sizes. These are some of the many reasons to set up your bank account as soon as you start your company:
- Separate your finances: Keeping your business funds separate from your personal ones might not be hard once your business is established and thriving. But early on, when you’re trying to make ends meet, it can be a challenge. You’ll save yourself a lot of headaches—not to mention avoid potential tax mishaps—by opening a bank account as soon as you can.
- Professional appearance: Asking customers to cut a check for deposit into your personal bank account isn’t a great look. It makes you look unprofessional, and clients might even be hesitant to work with you. Having a business bank account takes that worry away and helps you establish your business as legitimate.
- Build your business’s credit rating: Just like how everyone has a personal credit score, so does every company. The better your company’s credit score, the more likely you are to get a loan with a lower interest rate. One great way to increase your business’s credit score is by opening a business bank account.
What should you consider before opening a business bank account?
In addition to knowing what a business bank account is and the right type of bank account to open, you’ll need to know which financial institution to use. These are a couple of things to consider when selecting a bank:
- Use your current bank: If you want to keep things as simple as possible, you can likely open a business bank account with your current bank. Keep in mind, just because a bank has served you well for your personal finances doesn’t mean it’s the right fit for your business account.
- Associated costs: Most banks require some sort of monthly fee to maintain a bank account in addition to an initial setup fee. You may also have to agree to keep a certain balance in your bank account at all times or risk paying a penalty. Many of the free bank accounts will limit the number of monthly transactions you can conduct, so you might want to consider paying a premium account instead of going with a free account. NorthOne charges a $10 monthly fee, but doesn’t require a minimum balance and won’t hit you with hidden fees.
- Future needs: Good business owners are always thinking ahead, and that should hold true when it comes to your bank account. Make sure your bank will meet all your expected future needs, like integrating with your payroll software once you have more employees.
- Perks: Lower interest rates on loans and business credit cards are a few of the perks offered by some financial institutions. Be sure to take a look at the available benefits when you’re comparing different banks.
- Local branch: Physical bank branches are becoming harder to access these days. If you want to do things the old-fashioned way by visiting a physical branch, make sure you pick a bank that has one nearby. With today’s online banking options, though, you don’t necessarily need to visit a physical branch. If your bank doesn’t have a branch, make sure they offer great customer service online or over the phone, like NorthOne.
Get ready to open a business bank account
If you’re just getting your small business off the ground or if you’ve been doing all of your business banking through your personal account, now’s the time to sign up for a business bank account. Talk to our team today to learn more about what a business bank account is and the perks of using NorthOne.