There are over 30 million small businesses in the United States and a significant number of larger enterprises, too. If you own a business, you need to explore business banking accounts. They can help you keep your personal and business expenses separate. Plus, business banking products cater to the unique needs of a company. So, what is business banking, and how does it work?

There are many business banking products and tools to choose from. Not every business will need small business loans or commercial leases. If you do, having a business banking account and credit history established is helpful.

Read on for an overview of some of the most common business banking services. We’ll also provide some advice on how to choose which products are right for your company.

What is business banking?

Business banking is also referred to as commercial banking. The term is used to refer to any type of banking account that is exclusively used for business purposes. This includes checking, savings, certificates of deposit (CDs), loans, real estate loans, credit card services, and money market accounts.

How is business banking different from personal banking?

Business banking deals with commercial enterprises. However, freelancers and non-profits often qualify for business banking services, too. These services are specifically geared toward business owners. Some tools, like business credit cards, offer generous sign-on bonuses and rewards. Others, like money market accounts and CDs, allow you to earn better interest rates.

All of these tools help you keep your personal expenses separate, and help you manage your business expenses and cash flow. Some banks and business banking tools even offer financial management tools. They can operate independently or integrate with your current accounting software.

What are the benefits of business banking?

You might wonder why you need business banking products, especially if you’re a sole proprietor. While it can be tempting to just use your personal accounts, it’s not recommended. Here are the top benefits of business banking:

  • Keep business and personal expenses separate: Keeping your expenses separate is crucial for accurate business accounting. When expenses are commingled,it’s easy to miss expenses and income. It’s also easier to make crucial tax mistakes. If you’re serious about your business and its growth, you need business banking tools.
  • Give customers an easy way to pay: Having a business bank account makes it easier for you to accept ACH and credit card payments. It also gives you a professional way to pay your vendors and other expenses.
  • Hire and pay employees with ease: Business banking accounts enable you to set up payroll, which allows you to hire and pay employees. Some businesses even offer payroll services.
  • Enjoy better fraud protection: Banks offer special tools to protect business owners from fraudulent transactions, whether check, credit card, debit, or other types of transactions.
  • Consolidate your financial tools: Your commercial bank may offer tools to help you manage your cash flow and investments. These include check reconciliation, accounts receivable services, accounts payable, and more. Why not have everything on one simple dashboard?
  • FDIC insurance: Like personal bank accounts, business accounts also enjoy Federal Deposit Insurance Corporation (FDIC) protection. They’re both covered up to $250,000 per FDIC-insured bank. The coverage is separate from personal bank account coverage—as long as the business is separately organized under state law. You also cannot form a business to increase FDIC coverage as the primary goal.

An overview of different business banking products

There are many business banking products available. Depending on your business type, industry, size, and other factors, not every product will suit your needs.

Here are some of the most popular options:

  • Business checking: Business checking accounts enable your company to accept payments from clients and customers and pay business expenses. Just like with a personal account, you can withdraw cash, use a debit card, or write a check.
  • Business savings: It’s always wise to have cash reserves, especially if your business regularly experiences seasonal slowdowns. Business savings accounts earn interest on your money, but there may be limits to how many transactions you can make per month.
  • Certificates of deposit: CDs are a short-term investment opportunity. By investing your money for one to 12 months, you’ll receive a fixed rate of return. Banks typically require $1,000 or more for CDs.
  • Business credit cards: Business credit cards are an excellent source of short-term financing. Instead of paying on your personal credit card, you can keep your expenses separate, build credit, and earn rewards like cash back, travel perks, and more.
  • Commercial loans: Commercial loans include small business loans, commercial real estate loans, and more. Depending on the loan terms, type of business, and whether you’re an existing customer, you may receive better rates than you would be able to otherwise.
  • Money market accounts: This type of account is somewhere between a checking and savings account. They allow you to earn interest on high balances—and the rates may be better than what you can get on a personal money market account.

Your bank may offer additional business banking products. Ask a representative what’s available, and what might be right for you.

How to get started with business banking

Finding the right commercial bank, and applying for their tools, can be a process. Here’s what to consider:

  • Reputation and track record: First and foremost, you’ll want to ensure your bank of choice is reputable. Research whether a potential bank has a good reputation within your industry, and a track record of success.
  • Available services: While you might not need every business banking product currently on the market, don’t discount the possibility that you might later on. Remember, existing customers often benefit from preferential rates and other key perks—plus, it can make the application and approval process easier. Even if you’re just starting with checking and savings accounts, it’s good to build a relationship with a commercial bank that offers a variety of services.
  • Experience with your industry: Commercial banks often offer financial guidance in addition to banking products. It’s smart to choose a bank with experience in your industry, whether that’s a small e-commerce business, independent restaurant, or major corporation.
  • Whether you’ll have a dedicated contact: While it might not make or break your experience with the company, having a dedicated point of contact can be a great bonus. They’ll be familiar with you and your company, and you won’t have to wonder who will handle your accounts at any given time.
  • Reviews and word of mouth: Don’t forget to ask your professional network about their experiences. If you’re brand new to your industry and owning a business, look for reviews online, with the Better Business Bureau, and more.
  • Ability to grow along with your company: Finally, make sure your commercial bank can grow along with your company. It’s not just about the services: if your small company suddenly hits the big time, you’ll want a bank that’s up to the challenge.

The right business banking services can help your company thrive and grow. Research thoroughly, ask plenty of questions, and find the enterprise and services that suit your needs best. A NorthOne business bank account makes it easy to deposit funds, process payments, take advantage of the MoneyPass™ ATM network, keep your business funds organized, and more, all from your smartphone. Reach out to learn more about how branchless small business banking with NorthOne can work for your business!