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

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  • Business banking can come in the form of commercial or corporate banking.
  • Some employers can save money on their payroll taxes by making deposits directly to an employee HSA account, 401(k) or supplemental insurance program.
  • In addition to providing business checking and company credit cards, some banks offer payment processing services, payroll services, retirement accounts and HSA services.

Choosing the best bank for your business is a lot like selecting the right job candidate to hire. You need the bank to have the right attributes and abilities so it helps you, the business owner, reach your goals and move your business forward.

To entice new small business owners and entrepreneurs, banks and credit unions offer a variety of bonus features with their business bank accounts. If you're looking to open a small business account, there are some popular extra services you want to look for. However while some features may be included at no extra charge as part of a bank's business services, others come with additional fees.

Banks provide business-specific financial services that help business owners manage their money. In addition to basic checking account services that allow business owners to deposit funds and write checks, they may also allow businesses to transfer money by Automated Clearing House (ACH) and wire. Banks may also provide business credit and debit cards, merchant services and business loans. Here are four banking services you should take advantage of. 

Opening a checking account that has a low balance minimum and 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 low balances.  

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 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.

This is 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 some restrictions on the number of transactions you can make each month.

A business credit card is convenient to have. Look for one with a low-interest rate that helps you earn points and rewards. These are beneficial because they help you keep your business expenses separate from your personal purchases, build a business credit history and cut down on reimbursement paperwork. 

There are a few ways to bank in business and knowing the difference will help guide you to the resources you need. Most banks have a commercial and a corporate division. Commercial banking differs from corporate banking in that commercial customers are primarily individuals and small business owners instead of large corporations. Commercial banking services typically include merchant services, commercial loans, global trade services and treasury services. Like retails banks, they offer checking and savings accounts.

Corporate banking is a specialized division of a commercial bank. It offers credit, cash and asset management and insures large, small and midsized 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 their services, but the real difference is in the clientele and the profits each banking type earns. 

A business banker works closely with clients to determine which banking products and services best fit their needs, such as business checking accounts, credit cards, treasury management, loans, even payment processing. They may be able to reduce or waive fees in some instances and may be able to 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. This is an important factor, because the right banking relationship can provide you with valuable financial advice and improve your chances of gaining funding and receiving favorable terms.

Small businesses need a variety of business banking services. You want to choose a bank that offers a full range of services so it supports your banking needs as your business grows. Here are some of the features to look for.

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

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

Integration with your accounting software can make all the difference when it comes to managing your business bank account. It allows you to track your finances and monitor your cash flow daily. It also helps you avoid accounting mistakes because it automatically records the money moving in and out of your accounts.

As small businesses hire more employees, a bank-offered payroll service may simplify bookkeeping for busy small business owners. "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.

Payroll services are also offered by independent payroll companies. Before signing up for the service through your own financial institution, compare the features of bank-offered programs against those offered by outside companies, advised Rohit Arora, CEO of Biz2Credit, an online credit resource for small businesses. "In the case of bank-offered payroll, one should look at what happens in case of insufficient funds," Arora said. Make sure to compare the fees banks charge with those charged by independent payroll service providers, Arora said.

You should be able to transfer money, pay bills and deposit checks all from your computer or phone. 

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

One new feature popping up in banking packages is fraud insurance coverage. "Fraud insurance is provided by the lending institution to prevent any loss in the business checking account because of fraudulent transactions," Arora said.

Arora explained that fraud insurance is important for business checking accounts that give more than one person access to the account, especially when the accounts normally 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," he said. "This can lead to adverse remarks on the business's credit." 

If you've been thinking about offering your employees retirement plans, such as 401(k) plans or pensions, look beyond your insurance agent to your bank, Martin said. Increasingly, banks are offering retirement account setup and maintenance as a bonus feature for their business customers. This is 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 told Business News Daily.

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

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

Money-saving offers from other companies are valuable bonus features that are available with some small business banking packages. Martin noted that 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.

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, as well as the locations or geographic areas where the cards can be used.

Banks regularly offer new features to their business customers. Keep your eyes open for features such as access to peer groups, bank blogs with useful business content, business-related classes, educational materials and financial planning services.

Finding the right bank for your business requires some research but is well worth the effort. Look for a bank that assigns a business banker to your account, and offers a full suite of business banking products and services, including business checking and money market accounts, online banking, complete payroll solutions, business credit cards and fraud insurance.

Additional reporting by Sarita Harbour, Business News Daily contributor. 

Simone R. Johnson

Simone R. Johnson was born and raised in New York City. She graduated from the University of Rochester in 2017 with a dual degree in English language media and communications and film media production. She has been a reporter for several New York publications prior to joining Business News Daily and business.com as a full-time staff writer. When she isn't writing, she enjoys community enrichment projects that serve disadvantaged groups and rereading her favorite novels.