One of the first steps in starting your own business is opening a business bank account. There are a number of good reasons to have a bank account dedicated just to your business, but the main one is that it allows you to keep your business and personal finances separate. Having two distinct accounts simplifies your bookkeeping and helps you track your income and expenses more effectively.
But now that it’s time to choose an account, the options can be overwhelming. From the big bank with a branch down the street to the range of smaller, more customized online banks, how do you decide what’s right for your business? Read on—we’ll help you figure out what you need and where to get it.
Let’s start with some basic definitions: Online banking is a digital platform that allows you to manage your bank account online, without having to visit a physical branch. You can access your account information, check your account balance, transfer funds, pay bills, and deposit checks from anywhere with an internet connection. This makes it an attractive option for freelancers and small business owners who need to manage their finances on the go. It’s also appealing for people who don’t live near a branch, or just don’t want to make the trip.
It’s worth noting that while most traditional banks do have some online component where you can manage your account via their website or app, you’ll still likely have to visit a branch for certain transactions.
Convenience: Online banking wins for convenience. It’s highly accessible, allowing customers to manage their finances from anywhere at any time.
Lower fees: Online banks typically have lower fees compared to traditional banks, which can be helpful for budget-conscious small business owners.
Higher interest rates: Online banks may offer higher interest rates on savings accounts and other deposit accounts, which is a boon if you’re looking to earn more money on your deposits.
Easy to use: Online banking platforms are usually user-friendly and intuitive, making it easy for customers to navigate and manage their finances.
Mobile banking: Nearly every online bank offers a mobile banking app so you can manage your account wherever your phone may take you.
Advanced features: Online banks often offer extra features, such as budgeting tools and automatic savings plans.
Security concerns: Online banking can be perceived as less secure, though many offer extra security features to offset this risk.
Limited in-person services: While online banking often offers phone, email and live chat support, in-person customer service is usually not available.
Potential for technical glitches: If you’re relying solely on online access for your banking, a technical error or internet outage can hinder you.
You may already have a good sense of traditional banking—depending on your age, it may have been the only banking option when you were younger. Traditional banking has been around for centuries and involves conducting financial transactions through a physical bank branch.
With traditional banking, customers can walk into a branch and speak to a banker face-to-face, deposit or withdraw funds, and access a wide range of banking services, such as loans and mortgages. Depending on their size, traditional banks may have a network of branches across the country, or be localized to a certain geographic region.
In-person customer service: If you love the IRL experience, traditional banking might be for you. This can sometimes come with a more personalized experience, where you can interact face-to-face with bankers, and get help and advice on the spot.
Wide range of services: Many traditional banks offer a wide range of services, such as loans, mortgages, investment products, and insurance, which can be helpful for customers with diverse financial needs.
Physical branches: These are the cornerstone of traditional banking, where you can go in to take care of your banking needs.
Security: If cybersecurity is a concern for you, traditional banks may help you rest easy.
Limited access: Getting to a branch while it’s open can be a real chore. If you travel or move, traditional banks may not have branches where you’re headed.
Longer wait times: Traditional banks can often be busy, leading to longer wait times for customers who need to speak with a banker or complete a transaction.
Higher fees: In order to keep the lights on, traditional banks often have to charge higher fees than online banks, which can be a concern for cost-conscious small business owners.
Limited technology: Traditional banks may not offer the same features or technology as online banks.
Manual processes: Often, paperwork can still be a hassle with traditional banks. Filling out paper forms and snail-mailing documents can be time-consuming and less efficient compared to online banking.
Choosing the right banking option is a critical decision that can have a significant impact on your day-to-day operations and finances. As you weigh your options, here are some questions to think about:
Do you prefer customization or convenience? Think about your banking habits and preferences. If you’re attracted to the customized help of in-person interactions, traditional banking may be the better choice. However, if your priority is convenience and accessibility, online banking is likely the way to go.
How do you feel about fees? How budget-conscious are you? Online banks typically have lower fees compared to traditional banks, which can add up to significant savings for small business owners. Additionally, online banks often offer higher interest rates on savings accounts, which can help you earn more money on your deposits.
How feature-focused are you? It’s worth considering the technological advantages of online banking. Beyond mobile apps, online banks often offer extras like budgeting tools and automatic savings plans, which can help make it easier to manage your finances. If you like to keep tabs in real-time, online banking is more transparent, with minute-by-minute updates on your account balances and transactions.
Overall, while traditional banking has its merits, online banking is quickly becoming the go-to option for small business owners. With its convenience, lower fees, and advanced features, it's worth considering as you choose the right banking option for your business.
If you’ve decided online banking is the right fit, the next step is opening a business bank account. It’s often easier than you might think, and it can be done from wherever you are, instead of waiting for an appointment at a traditional bank.
Gather the required documents: Before opening a business bank account online, you’ll need to have some information handy, including your legal name and address, your social security number, date of birth, and some tax information.
Fill out the application: This typically involves filling out an online form with your business and personal information. You may also need to answer some questions about your business and its financial needs.
Wait for approval: After you submit your application, the online bank will review it and determine whether to approve your account. Sometimes accounts are activated immediately, and other accounts might take up to 48 hours to be approved and activated. The wait time depends on the online bank.
Fund your account: Once your account is approved, you can fund it in a variety of ways. A few options include transferring money from your existing bank account, wire transfers, payment apps like Venmo or CashApp, and setting up direct deposit.
Activate your physical card: When your physical card arrives, follow the steps to activate it. Many online banks will provide a virtual card you can start using right away.
Whether you’re one of the many taking the leap to self-employment or you’ve been at it for years, it’s never too late to streamline your business. One of the best ways to do this is to open a business bank account.
If you’re looking for a business bank that offers the flexibility you need without the high fees, Found is the perfect fit. Our all-in-one banking solution offers a business account, powerful invoicing tools, and time-saving bookkeeping features. Try it out today—it’s smart, simple, and free to sign up.
This material has been prepared for informational purposes only.
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