As your business grows, it’s ideal to establish yourself as an entity. But to do so, you must set yourself apart from your company, including the bank account you use.
Having a small-business bank account separates your personal and business expenses, making it easier to organize your finances and prepare for taxes.
However, it’s important to choose an institution that fits your business goals and needs. There are a variety of online and brick-and-mortar options for small businesses —– here are the top things to look for and a few good choices.
Don’t rush shopping for a business bank account — make the wrong decisions, and you risk uprooting everything down the line. Switching bank accounts midyear is an unnecessary headache that can complicate tax preparation. So take your time and analyze the pros and cons of each before deciding.
But how will you know when you’ve found “the one”?
Here are several ways to tell if it’s a good match.
You have a business to run — there’s no time to waste on lengthy applications and processing times. Thankfully, many banks today offer fast approvals, allowing you to set up your account online within minutes.
And if it requires little to no money to open your account, even better.
Using accounting tools like FreshBooks and Xero? Then having a way to link your new bank account will prevent hiccups in your bookkeeping process. Many small and large banks offer this. For example, Bank of America and US Bank integrate with QuickBooks.
It’s ideal to be able to withdraw or deposit cash whenever you want, so you can conduct cash transactions if needed. That means banking with an institution that has plenty of ATMs and branch locations in your area.
An app with excellent features can sometimes make up for this by allowing mobile check deposits.
Some banks require small-business owners to maintain a specific amount in their account each month. Go below and risk paying hefty “maintenance” fees. Then others have a maximum amount you can add to your account each day.
James Diel, founder and CEO of Textel, advises entrepreneurs to keep their expected monthly cash flow in mind when choosing a bank.
“Find an account that doesn’t cap the maximum or minimum withdrawals in a way that’ll negatively impact your business or add a mountain of overage fees onto your account maintenance costs,” says Diel. “Since cash flow changes as your business grows, evaluate your needs annually to ensure your account is still the best fit for you.”
The great debate remains: Is it better to open an account with a local or national bank? The answer isn’t so simple, since it depends on various factors.
If you travel frequently and need to walk into a branch wherever you are in the country, then a national bank with lots of physical locations could be a better fit.
But that is one example — here are the pros and cons of each type.
A local bank consists of credit unions, minority-owned banks, and others with a few locations in a city, state, or region.
Pros
Cons
A national bank is usually owned by a large corporation and has many branches across the country or even the globe.
Pros
Cons
Which you choose depends on your personal preferences as a founder. For example, Rafael Romis, founder of Weberous Web Design, found that customer service was the key to his business.
He initially banked with Chase for several years and was happy overall. But things changed after covid hit.
“A friend recommended a smaller local bank (California Bank & Trust) which, according to him, was processing loan requests much faster due to their focus on service,” says Romis “We went in and met with them, and the rest was history. We switched over and never looked back. We found that working with a business bank that knows you on a first-name basis and can create a custom service offering according to your needs gave us a great edge we never knew was possible.”
There are over 4k FDIC-insured banks in the US, giving you plenty of options to choose from. Here are a few good choices for every kind of venture.
A multinational brand, Chase offers three business accounts:
The best option for small-business owners is the Chase Business Complete Banking account because the others require you to maintain a balance of $35k and $100k.
Pros
Cons
One of America’s largest banks, Wells Fargo offers three account options for small businesses:
Pros
Cons
Novo is a highly rated FDIC-backed online bank catering specifically to business owners. It’s popular among freelancers, consultants, and ecommerce sellers. However, it also attracts new small-business owners across industries, especially since it only requires $50 to open an account.
Pros
Cons
NBKC offers a free business checking account that requires no minimum balance, and charges nothing for check deposits. It also boasts free access to over 34k ATMs and unlimited transactions.
Pros
Cons
Axos is an online-only bank with a free business checking account called Axos Basic Business Checking. It also offers business loans, CDs, and savings accounts. Or you can opt for the Axos Business Interest Checking (requires a $5k minimum daily balance to waive the $10/mo. fee).
Pros
Cons
US Bank is a smaller national chain with a fee-free business checking account, plus perks you’ll typically find with bigger banks.
It offers three business account options:
Pros
Cons
Already have a personal account with BofA? Then opening a Business Advantage Checking account (two options: Fundamentals or Relationship Banking) isn’t a bad option. This will make it easier to transfer funds to and from personal accounts.
Pros
Cons
Capital One is an excellent choice for small-business owners with a large number of sales monthly. Some banks charge fees after reaching monthly transaction limits, taking away from your bottom line.
There are two business checking account options:
Pros
Cons