An Introduction To Small Business Banking

Accountancy Resources

An Introduction To Small Business Banking

Banking Small Business Author: Admin


Small business banking is a very essential tool for small business.

There are lot of banks that offers various facilities for small business. These banking facilities are geared towards the growth and development of these small business.

Before starting your small business you should be able to contact your bank to see how they support small business and how their facility can be of help to your business.

Some bank provides for small business facilities and tools needed to getting more customers. From a good banking facility you can get free serminal and credit checking facility.

There are other banks that provides dedicated services for small business. these services ranges from starting a business, financing your business and other business surport. Bank Of America has dedicated service for Business banking . Among the services provided by the bank is dedicated services for online banking, business products and business advice.

There are lots of bank in the United State, United Kingdom and other nations that provide services for small business. Dont miss out on these facilities.

Reasons why you should not Mix Personal and Small Business Banking

Hobby Business: Government rules stipulate that only businesses can deduct business expenses. If your business may look like a hobby, a personal bank account for business creates a harder time convincing the government you are operating a business.

Tax Time Nightmare: When it comes time to declare income and expenses from the business, personal transactions will have to be separated from business transactions. It will be a nightmare and time burden going through all transactions and figuring out business from personal.

Limited Audit Trail: It is not a requirement of the government that you have a separate small business banking account and record keeping method. It is required that all records be accurate, complete, permanent and showing a clear record of income and deductions. Providing a separate business statement and record provides a clear audit trail.

Missed Deductions: Co-mingling your small business banking with personal creates a mess of transactions on your account statement. It is easy to overlook or miss deductions you may be entitled to. Whether you or an accountant will be preparing the tax return, messy record keeping will cost more in time, money, and possible missed deductions.

Lack of Professionalism: If you have clients who write checks to you, check writing in your personal name as opposed to business can convey that your company is a part-time venture. Even if your business is part-time, take it seriously and your clients will too

Choosing a Bank for Your Small Business

Take the time to open a small business banking account to simplify your record keeping and life. Shop around for the best deal. Small business banking varies in fees and features. The costs of a business account are far less than the benefits to your business.

Fees are partly tax deductible as an expense. Don’t forget to consider that your business may grow. Opening a business account with a bank earlier can help with required financing in the future.

Remember run your business as a business as it’s important for every business owner to bank (and a banker) that will contribute to the success of their business.

A good business owner needs to be careful in choosing a bank or financial institution. Here are some important things to consider when selecting a bank.

What do you need a bank for?

Unfortunately most business owners don’t thoroughly consider their needs when selecting a bank. Consider some of the things your banker will help you with. They can:

  • Establishing a basic checking account that will let you pay your suppliers and deposit revenues from your customers
  • Provide special loan programs for small businesses, including SBA loan programs and other government-guaranteed or agency loans.
  • Provide advice regarding what it will take to qualify for the loan that best meets your needs.
  • Assist you with the cash management needs of your business.
  • Offer investment products of varying maturities: overnight to long-term certificates of deposit.
  • Offer investment products of varying risks (and thus returns): treasury securities and insured deposits to other stocks and mutual funds.
  • Assist you with finding financial information on your industry (such as RMA Annual Statement Studies, Dun and Bradstreet reports, etc.)

Build your Relationship with the bank

It’s a good idea to establish a close relationship with a banker before you need money.

The right banker will be someone that understands the needs of emerging and growing businesses.

They will be interested in your business dreams and will help you achieve them.

All Banks are Different

Although there are laws and regulations that govern the activities of banks, savings and loans, credit unions and investment firms – not all financial institutions are the same!Each institution establishes its own policies for:

  • types of products and services that are offered,
  • criteria for qualifying for a loan,
  • minimum balances for accounts,
  • interest rates and
  • Charges for account services

So while one bank may specialize in home loans or auto loans another may focus on commercial loans for businesses.

Some banks may only offer basic deposit accounts while others have lock box services, sweep accounts, and even online banking! That’s why we stress the importance of evaluating your business needs before you select your banker.

How to Find a Good Bank

Here are some tips that will help you in finding a good bank:

  • Approach the decision as a long-term investment.
  • Ask your accountant or lawyer to introduce you to bankers that they are familiar with.
  • Check with your local chamber of commerce to find out what banks are active in the community. Attend their meetings or other service organizations to meet bankers that are involved and have interests similar to your own.
  • Look for a complementary personality, someone you can relate to.
  • Introduce yourself to the banking center manager. If you are looking for a loan, ask to meet the loan officer that will be assigned to you.
  • Find out how long they have been in their current position (bank managers and officers change locations and get promoted).
  • Tell them about your business and the form of organization so they can tell you what special products and services or restrictions might apply.
  • It is not likely that you will make a decision on pricing alone, but do compare interest rates on deposit accounts and basic consumer loans (most business loans are negotiated, so the rates won’t be posted at the banking center). More so, look carefully at the charges for services if your commercial deposit account will billed on analysis

Comparison Shops

Banks are desperate these days to attract small business accounts, so it’s worthwhile to shop around.These days, you can usually get free checking and no account fees.

If you are paying $20 or so per month for things like account analysis, it’s time to switch banks. There are better deals available, and there’s no sense throwing away money.

Make sure you compare financial institutions in order to find the one that will serve your business’s needs and will also provide support and assistance during the infancy stage of your business.

Selecting an institution that you can work with will be especially important as your business grows. Start gathering information as soon as possible to help you make this important selection.

Understand small business banking key terms for loans

Loans help begin small businesses and expand them. It is very important to understand all of the terms used in the wording of your small business banking loans.

Many business owners sign a promissory note, which is a contract promising to repay the amount borrowed at a given time and under certain conditions.

The promissory note may be secured or unsecured. Secured notes give the lender something to take if the borrower does not repay the note. In unsecured notes, the lender examines the borrower’s cash flow and profits of business for repayment.

Choosing a Business Banking Account

One of the first line of action taken in a small business account is about choosing a bank account for your business. The task of choosing a bank account is not an easy one. In choosing an account you have to consider transaction and borrowing cost including other facilities offered by the bank.

Let us look at simple guide to follow when choosing a business bank account.

  • Compare various business bank offers including the cost and charges associated with each of them.
  • Compare various banks online banking service to see the one that best meet your need and is more flexible to you and your business needs.
  • Two good heads they say is better than one. In choosing a small business bank, go for a bank with specialised small business banking unit. These banks have dedicated team that will help you deal with your small business needs