A Guide To Business Banking

Learn more about business banking and banking services available for small business owners, including business bank accounts, credit cards, and more.

When you think of business banking, big players like Wells Fargo, Citi, or Bank of America might come to mind. But what exactly do they do for your business? And which provider is right for you?

Here’s a guide to business banking to get you started.

Learn more about Square Banking.

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What is business banking?

Business banking refers to the process of a third party managing a company’s finances. When you select a banking provider to store your business funds, you receive a business bank account, the option to apply for business loans, and other financial services that you may need.

What’s the value of business banking?

Business banks are designed to keep your funds safe and allow you to get a clear picture of your financial health. A business banking account offers perks that business owners don’t receive with a personal checking account. (It’s important to separate your business and personal finances for other reasons, too.)

A business banking account allows you to:

  • Track business and manage cash flow effectively. Creating a separate business bank account makes it easier to track business expenses without getting lost in personal finances. Cash flow management is also an important financial management tool.
  • Access a business debit card. Some providers offer a business debit card that gives you fast access to your money and helps you better manage your cash flow.
  • Apply for business loans. Business banking solutions can offer business loan options that can help you grow your business.There is a large variety of loan types you may want to utilize if you’re looking to take on financing for your business.
  • Save money on business taxes. A separate business account makes it easier to deduct business expenses for taxes.
  • Protect yourself from legal action. Separating your business and personal finances minimizes the risk of business lawsuits affecting your personal assets.
  • Protect customer information. Merchant services offer customer protection to ensure security.
  • Access ACH payments. An automated clearing house (ACH) is a network that manages electronic payments and money transfers. When you set up a business banking account, you receive access to ACH payments, which provide a convenient way for customers to pay you and for you to pay your vendors.
  • Create a professional atmosphere. Customers can write checks or create invoices pointing to your business rather than you personally, which creates a more professional, credible image.
  • Utilize fast Transfers. Some providers offer immediate transfer options, so you can move money in and out of your account balance when needed. Instant Transfers let you send money to a linked account in seconds.

To open a business bank account and reap the business banking benefits, you need to provide documentation that proves the legitimacy of your business. You’ll need several business documents to apply for and open a business bank account. These documents may include an Employer Identification Number (EIN), business formation documents, and a business license.

How to open a business account

The account you open depends on the type of business you’re starting or running, and how you plan on using the account. Here are a few factors to consider when selecting a provider:

  • Business features. Whether it’s maintaining cash flow or offering a business line of credit, business banking providers offer a variety of features that can help you manage and grow your business. Be sure to ask about features that are right for you.
  • Online accessibility. In today’s world, a lot of business banking can be done online. You want to know how you can access your account quickly and easily, such as online or through an app.
  • Banking fees. Each provider may have a monthly fee for its services and/or additional hidden fees that it tacks on once you sign a contract. Be sure to ask each potential provider for a breakdown of its monthly fees.
  • Cash deposit limits. Business checking accounts may limit the amount of cash an owner can deposit at one time. If you reach the capacity in a billing cycle, you might be charged additional fees.
  • Transaction limits. Similar to cash deposits, banks may limit your monthly transactions or enact a transaction fee based on your volume.

What is online banking?

Also known as internet or web banking, online banking is a form of banking in which transactions are conducted electronically over the internet. While customers accustomed to traditional banking may visit a bank branch to complete basic banking transactions, online banking customers would use a computer or mobile device to log in and transact online.

What is the difference between online banking and digital banking?

Online banking is typically associated with a digital front end experience while other activities associated with your account may require manual intervention. Digital banking, on the other hand, goes beyond digitizing basic banking features and services. Digital banking will combine online and mobile banking as well as other financial services associated with traditional banking.

What are business banking services?

There are several business banking services a bank may offer. Here are a few common services you might expect:

  • Transfers
  • Bill payments
  • Savings and checking accounts
  • Business credit cards and debit cards
  • Checks
  • Financing options such as loans, lines of credit, and more
  • Payroll services
  • Fraud protection

Mistakes business owners make when banking

Once you’ve chosen your business banking provider, you need to set up your account. For the most part the process is pretty straightforward, but you still need to be aware of some common mistakes.

Not creating separate business and personal banking accounts. It’s crucial to keep your business and personal finances separate, meaning a business bank account should be one of the first things you get when starting a business.

Incorrect account setup. The initial setup requires time and various documents. Be meticulous during this step of the process and work with your provider to better understand everything you need to get your account up and running.

Not maintaining the minimum monthly balance. Some business bank accounts require a minimum monthly balance. If you dip below this minimum, providers usually have associated fees.

Not using your bank balance to manage cash flow. To avoid overdraft fees or minimum monthly balance fees, you can send money to a bank account in seconds with instant bank transfers, or schedule recurring transfers with same day money transfers.

Square Debit Card: Manage your business funds

If you accept Square Payments and aren’t looking to use a bank for traditional business banking, you can manage your business funds using Square Banking. With Square Banking, your payments, business banking accounts, and cash flow sync together.

In addition to this, Square Debit Card gives you real-time access to your Square Balance so you can purchase inventory, supplies, or anything else you need to run your business as soon as you make a sale. You can see a complete snapshot of your Square balance spending and activity within your Square Dashboard and in Square Point of Sale. Square Debit Card may be helpful for businesses that have:

  • Tighter cash flow
  • Business expenses that can be paid with a debit card
  • Only a personal bank account, with no way of separating business expenses.

With Square Debit Card, there’s no need to wait in line at a bank branch with paperwork in tow; simply order a card from your Square Point of Sale app.

**Questions about Square Debit Card? Here’s how it works.

Square, Inc. is a financial services company, not a bank. Banking services are provided by the Square banking affiliate, Square Financial Services, Inc. or Sutton Bank; Members FDIC.