What to Look for in a Bank Account for Your Small Business

What are business banking services?

To entice new small business owners and entrepreneurs, banks and credit unions offer various services and bonus features with their business bank accounts. Business-specific financial services are the most crucial offerings because they can help business owners manage their money properly. 

In addition to essential checking account services that allow business owners to deposit funds and write checks, banks may also allow businesses to transfer money by Automated Clearing House (ACH) and wire. Many provide credit and debit cards, merchant account services, and small business loans. 

Here are four services any potential bank you’re considering should offer. 

Business checking with interest

Opening a checking account with a low minimum balance that allows you to earn interest helps you avoid fees and earn interest on your funds. Online banking and mobile apps help you manage your money so you can keep abreast of your account and quickly detect fraudulent activity and a low balance.  

Treasury management

Treasury management helps you balance and manage the funds in your business bank account. It is meant to minimize a company’s financial risk. Through an online platform, it places all of your business’s financial information under one roof. 

An online treasury management system provides convenient access to your business’s online banking, wire transfers, remote deposit capture, bill pay, ACH payments and collections. Many have a block-and-filter feature to help you monitor ACH activity on your account.

Money market accounts

Money market accounts are a great way for small businesses to earn interest on the money they hold in their accounts. Not only are money market accounts Federal Deposit Insurance Corporation insured, but they earn higher interest rates than checking accounts. 

Money market accounts minimize the risk of investing, because you always have access to your money – you can withdraw it at any time without penalty, though there may be some restrictions on the number of transactions you can make each month.

Business credit cards

A business credit card is convenient for small business owners. Look for one with a low interest rate that helps you earn points and rewards. Business credit cards are beneficial because they help you keep your business expenses separate from your personal purchases, build business credit and reduce reimbursement paperwork. 

What is the difference between commercial and corporate banking?

Most banks have commercial and corporate divisions. 

• Commercial banking: Commercial banking customers are primarily individuals and small business owners, not large corporations. Commercial banking services typically include merchant services, commercial loans, global trade services and treasury services. Like retail banks, checking and savings accounts are offered.
• Corporate banking: Corporate banking is a specialized division of a commercial bank. It offers credit, cash and asset management, and insures large, small and midsize corporations. Corporate banking usually provides higher profits for banks because of the large amounts of money and interest involved with corporate loans. 

Sometimes, the two divisions overlap in terms of services; however, the real difference is in the clientele and the profits each banking type earns. 

What is a business banker? 

A business banker works closely with clients to determine which banking products and services, such as business checking accounts, credit cards, treasury management, loans and payment processing, best fit their needs. They may be able to reduce or waive fees or offer better terms, such as lower fees or interest rates on loans. They may also offer financial insights and recommendations to help you meet your business goals.

When choosing a bank, small business owners should look for one that gives them access to a business banker with whom they can meet regularly to review their business’s finances. A business banker relationship can provide valuable financial advice and improve your chances of gaining funding and receiving favorable terms.

What small business banking services should your bank offer? 

Small businesses need various business banking services. It’s best to choose a bank that offers a full range of services to support your banking needs as your business grows. 

Consider the following valuable business banking services: 

Convenient Automated Clearing House access

ACH allows money to be transferred electronically without using paper checks, wire transfers or cash. It can be used for payables and receivables. Businesses often use ACH for payroll, loan payments and business-to-business payments. They also use it to accept customer payments, particularly for large invoices and recurring payments.

ACH costs vary by bank. Some charge a flat fee or a small percentage for each transaction, while others charge a monthly fee for a specific number of transfers. Before you sign up with a bank, ask what it charges to use this service. 

Accounting software integration

Many banks offer integrations with the best accounting software solutions. Ensure your bank integrates with your accounting platform so you can easily track your finances and monitor cash flow daily. An accounting software integration also helps you avoid costly accounting mistakes because your system automatically records money moving in and out of your accounts.

Payroll services

As your small business hires more employees, a bank-offered payroll service can simplify bookkeeping. “If you don’t quite have the budget for an independent bookkeeper, many financial institutions offer access to payroll software or services to help you get things done,” said Jennifer Martin, a small business coach and owner of Zest Business Consulting.

Independent payroll companies can also provide payroll services. Before signing up for payroll services with your financial institution, compare its features with those of top online payroll platforms. “In the case of bank-offered payroll, one should look at what happens in case of insufficient funds,” advised Rohit Arora, CEO of Biz2Credit. Arora advises business owners to compare fees before deciding on a solution. 

Online banking 

Your bank should allow you to transfer money, pay bills and deposit checks from your computer or mobile device. 

You may be able to save money on banking services if you choose an online-only bank; fees are often lower because the bank doesn’t maintain a brick-and-mortar location.

Fraud insurance

As payment fraud becomes more of an issue, fraud insurance coverage is a newer feature popping up in banking packages. “Fraud insurance is provided by the lending institution to prevent any loss in the business checking account because of fraudulent transactions,” Arora explained.

Fraud insurance is particularly essential for business checking accounts that give more than one person account access, especially when the accounts typically have multiple daily transactions.

“It’s important to have fraud insurance included so that it not only prevents any loss of money through fraud, but also prevents any bounced checks by the vendors,” Arora advised. “This can lead to adverse remarks on the business’s credit.” 

Retirement accounts and health savings accounts

If you’ve been considering offering employee retirement plans, such as a 401(k) plan or a pension, look beyond your insurance agent to your bank. 

More banks are offering retirement account setup and maintenance as a bonus feature for their business customers – an attractive incentive when hiring employees.

“Retirement benefits can be a great way for you to more deeply invest in your staff and may be the difference between a great job applicant choosing you over your competition,” Martin explained.

If you plan to offer health insurance to your staff, using your bank to make deposits into employee health savings accounts (HSAs) simplifies the process. You may even save a little money.

“Some employers will save money on their payroll taxes as a result of making deposits directly to an employee HSA, 401(k) or supplemental insurance program,” Martin noted.

Discounts on business-related items

Money-saving offers from other companies are valuable bonus features available with some small business banking packages. Some banks offer discounts on partner goods and services because of the sheer volume of purchases by bank customers.

Ask your bank for a list of partner companies offering discounts to its small business banking customers. Typical partners include hotels, insurance companies, airlines and office supply stores.

Control over employee spending on company credit cards

One risk of issuing company credit cards is that staff may use them for nonbusiness expenses. A service that gives small business owners control over staff spending can reduce that risk.

“Busy employers are concerned about how much or what their employees are spending on their corporate credit cards,” Martin said. “One of the newest features added to certain banks’ offerings for small business owners is Visa card payment controls.”

This feature lets small business owners set limits on daily spending, the days and times of transactions, and the locations or geographic areas where the cards can be used.

How to choose the best bank for your business 

Finding the right bank for your business requires consideration and research, but finding the right banking partner is well worth the effort. Here’s how to get started:

1. Consider your banking needs and preferences.

Your bank accounting needs might differ from other businesses. Your business type (sole proprietorship, LLC, corporation, etc.) will dictate many of your specific needs.

Some standard business bank account features you’ll likely need include online and mobile banking access, automatic bill payment services and wire transfers. You might also want to open a business savings account or a business retirement account.

2. Evaluate various bank services.

Evaluate the banking services you need and ensure your bank supports them. Specific services include payroll, software integrations, online banking, wire transfers and bill payment. 

3. Compare banking fees and surcharges.

Some business bank accounts come with hefty fees, including maintenance fees, minimum balance fees, overdraft fees, wire transfer fees and surcharges. When vetting your banking options, note their various rates and fees so you can choose the best option. 

Additionally, consider daily, weekly and monthly transaction limits. As a business owner, you probably need to make various (often hefty) payments, deposits, withdrawals and transfers; your business bank account must be able to accommodate them.

4. Meet with prospective bankers.

Before deciding on a business bank account, schedule meetings with bankers to discuss your questions and concerns. Supportive customer service is crucial when working with a bank, especially one attached to your business. Ask the banker about online banking options, bank fees, interest rates, rewards and more.

5. Read customer banking reviews.

Customer reviews will shed light on perks or issues you otherwise may not be aware of. Personal anecdotes from actual customers paint an authentic picture of what it’s like to work with a specific bank. Reviews can help you make a more informed decision when choosing the right bank account for your business. 

Choosing your business bank account

Choosing a bank account for your business is one of the most important decisions you’ll make as a business owner. It’s crucial to select a bank with the right features to meet your business banking needs, one that won’t limit your transactions. Take the time to vet your options and speak with multiple bankers before committing.

Simone Johnson contributed to this article.