When you own a small business, you can choose between having a retail banking account (also known as a personal account), or a commercial account. When you first start the business, or before it grows much, using a retail account is probably the way to go. Business accounts may require a larger daily balance to avoid fees, and the fees that are associated with it are often larger than those of a personal account. However, there are some benefits to having a commercial banking account you should keep in mind.
Businesses have a few different types of loans available to them that most individuals do not. As a business owner, you may need a line of credit to pay for operations just until a big deal or payment comes in. The terms of this are usually that you pay a monthly interest fee until the balance is paid in full. There will be a set time for the principle to be paid, often within a year. In addition, with proper financial documentation, you may qualify for a small business loan, something similar to a personal loan, but taking your business finances into account. Of course, it is better if you have an established relationship with the bank when you apply, but some may be inclined to give the loan to get your business.
Payroll and Invoicing
Some banks may offer small businesses help with payroll processing. You set up a payroll account with them, provide employee information, and send the hours worked to them for each pay period. They process the payroll, direct deposit your employees' pay, and make the tax deposits for you. Financial institutions may also offer invoicing services for your business. The invoices are created by you, online, and sent to the customer's email. The system keeps track of what has been paid and what is overdue. Using these benefits can save you from having to hire a bookkeeper or having to handle these tasks yourself while trying to keep everything else operational.
Of course, if you are a sole proprietor and have no employees yet, these benefits may not mean much to you. However, when you start thinking of expanding the business it may be good to change to a commercial account before you begin. This way, the bank can see what you are doing, have the paper trail to follow your progress and be more willing to give a loan to help you reach your goals. Once you have grown, you will be glad to take advantage of the other benefits.