Choosing a Bank for Your Small Business

Banking
8 min
Dec 19, 2022
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You’re ready to open a business bank account.

Easy enough … 

  1. Find a bank.
  2. Make sure they support businesses.
  3. Open an account. 
  4. Voilà!

But after about five minutes of Google searching through your choices of which banking provider to go with, you realize that there are literally hundreds of options.

Each one makes big promises of being the best banking solution for your business …

“We’re local!”

“We’re a BIG bank. We offer security.”

“Our online banking is the best there is!”

But you’re a unique individual with a one-of-a-kind business that has specific needs. 

What should you look for in a banking solution for your small business?

In this article, you’ll learn the most important things to consider when choosing a bank for your small business.

10 Things To Consider When Choosing a Bank for Your Small Business

#1: Services and Products

It’s important to first think about the services and products you need from a bank, and then find a bank with those services. 

Do you need a business debit card to make payments?

Do you want easy-to-use online business banking on your phone?

Do you need an interest-earning account for your idle cash?

Make sure the bank you choose has the services you need, such as:

  • Lines of credit
  • Mobile banking
  • Low-cost loans
  • Small business credit cards
  • Online banking and bill pay
  • Interest on business deposits; and
  • Cashback on business purchases

#2: Customer Service

When you’re a small business owner, customer service is everything. 

In business, unique situations pop up that can impact your banking. 

And sometimes, you’ll need to talk to a real person quickly to get your questions answered.

How easy is it to meet with someone? 

Do you have to schedule an appointment and potentially wait for days? 

Can you chat with an expert online? 

Can you pick up the phone and get to the person you need within a few minutes?

#3: Scalability and Growth

When your business is small, you can get away with a lot. 

You can choose a less-than-optimal bank and it won’t make that much of a difference in your day-to-day operations. 

But as your business grows, your banking needs will grow with it — and if your bank can’t accommodate that growth, you’ll start to feel the pinch.

Right now, you might be a small business. But, what happens when you double, triple, or maybe even 10x your size?

Will the banking provider help you grow and scale? 

Do they provide affordable working capital when you need to buy that next piece of equipment? 

Will they be responsive when you’re hoping to increase your credit card limit?

Think about your business in two years, five years, or even 10 years. Can the banking provider help you reach your audacious goals?

If the answer to any of these questions is “no,” then you might want to keep looking. A bank that can’t support the growth of your small business isn’t worth your time or money.

#4: Easy Account Integrations

In today’s digital world, it’s more important than ever that your bank easily integrates with the other software and apps you use to run your business. 

You should be able to link your accounting software, such as …

  • QuickBooks
  • Xero; or 
  • Another software

… to your business checking account so you can track expenses and income in one place. 

Ideally, your bank will also offer a mobile app that allows you to easily deposit checks and track your account balance on the go.

When evaluating banks, be sure to ask about their digital capabilities and whether they offer easy integrations with the other tools you use to run your business. 

Choosing a bank that makes it easy to manage your finances electronically will save you time and hassle in the long run.

#5: Mobile and Online Accessibility

With the technological advances of today, being able to bank from your phone or the internet is a must. 

When considering a bank for your small business, be sure to check out their mobile and online offerings. 

Mobile apps make it easy to: 

  • Check your business’s account balance
  • Transfer funds; and
  • Deposit checks while on the go

Online banking should be easy to navigate and include all the same features as their mobile app.

#6: Location and Network

When choosing a bank for your business, it is important to consider location and network.

Local branches can be important if you do a lot of traveling or if you have customers across the country. 

ATM networks can also be important when choosing a bank for your small business. 

For example, if you often travel, you will want to choose a bank that has ATM access across the country. This will allow you to avoid fees for using out-of-network ATMs.

If you are considering a bank for your small business, ask yourself:

Are there local branches I can visit? 

Do I need a bank with locations across the country? 

#7: Rates and Fees

When choosing a bank for your small business, make sure to compare the interest rates and fees offered by different banks. 

  • Interest rates because if you plan on borrowing money for your business, you’ll want to get the best rate possible.
  • Fees because some banks charge monthly fees for business accounts, while others charge per-transaction fees. 

Make sure you understand all the rates and fees associated with your account before you sign up for banking services for your small business.

#8: Perks and Special Offers

For small business owners, any attractive perks, special offers, or introductory offers can make a big difference when choosing a bank. 

Here is a list of typical offers banks may have for small businesses:

  • Preferential loan rates
  • Interest-bearing accounts
  • Waived fees for a certain period of time
  • Special programs for businesses in specific industries
  • Cashback or rewards programs for using the bank’s credit card; and
  • Free checking and/or free online banking for a certain period of time

It’s always important to read the fine print and make sure you understand the terms and conditions before taking advantage of any offers.

#9: Bank Type and Experience

Three primary types of banks that serve businesses are:

  1. Community banks
  2. Online banks; and
  3. Credit unions

Each has its strengths and weaknesses, so it’s important to evaluate your business needs before choosing one.

  • Community banks are typically smaller and locally owned, which gives them a better understanding of the needs of small businesses in their communities. They may offer more personalized service and more flexible loan terms, but they may also have fewer products and services than larger banks.
  • Online banks are a good option for businesses that do most of their banking online or don’t need full-service banking products and services. They often have lower fees than traditional banks and may offer higher interest rates on savings accounts. However, they may not have branches or ATMs, which can be an inconvenience if you need to deposit cash or make withdrawals.
  • Credit unions are non-profit organizations owned by their members. They typically offer lower fees and higher interest rates than traditional banks but may have fewer products and services. Some credit unions require you to be a member before you can open an account, so be sure to check the requirements before you apply.

#10: Funding Protection and Insurance

Ensure that the bank you choose for your small business is backed by the Federal Deposit Insurance Corporation (FDIC).

The FDIC is an independent agency of the United States government that protects the funds that depositors place in banks and savings associations.

In the event of a bank failure, the FDIC pays depositors for their insured deposits — up to $250,000 per depositor, per insured bank, for checking and savings account deposits.

To be certain the bank you choose is FDIC-insured, simply look for the FDIC logo or visit www.fdic.gov and use their "Bank Finder" tool to locate financial institutions with FDIC insurance.

Understand the Types of Business Banking Accounts the Bank Offers

There are many types of business bank accounts, and it can be confusing to understand which one is right for your business. 

Keep reading to understand the different accounts and what they offer so that you can make the best decision for your business.

Business Checking Accounts

The three main types of business checking accounts include:

  1. Basic business checking accounts are designed for businesses with low account balances and simple banking needs. These accounts typically have low monthly fees and few or no transaction fees.
  2. Commercial checking accounts are designed for businesses that have higher account balances and more complex banking needs. These accounts typically have higher monthly fees but also offer a larger number of free transactions.
  3. Merchant services accounts are designed for businesses that accept credit card payments. These accounts come with special features, like the ability to process credit card payments and deposit them into your account automatically. There is typically a higher monthly fee for these accounts, but it includes the cost of processing credit card payments.

Business Savings Accounts

Most banks offer different business savings accounts, each with its own set of benefits. 

The best account for your business will depend on how much you plan to save and how often you'll need to access your funds.

Business savings accounts typically offer higher interest rates than personal savings accounts, but there may be restrictions on how often you can withdraw money. 

Some accounts also require a minimum balance, so be sure to compare all the options before selecting one for your business.

Here are three of the most common types of business savings accounts:

  • Basic business savings accounts offer a low-interest rate and limited withdrawal options. They’re a good choice for businesses that don't need frequent access to their funds.
  • Business money market accounts offer a higher interest rate than a basic savings account, but require a minimum balance and limit withdrawals to six per month. They’re a good choice for businesses that want to earn more on their deposited funds but don't need frequent access to their money.
  • Business CDs offer a fixed interest rate for a set period of time. Business CDs typically have longer terms than personal CDs, and the interest rate is usually higher. Once the CD matures, you can withdraw your money or reinvest it into another CD.

Cash Management Accounts

As a business owner, you need to be able to manage your cash flow effectively to ensure the success of your business. 

A cash management account from a small business bank can help you do just that.

Cash management accounts are checking accounts that offer features and services designed specifically for businesses. 

These accounts usually offer higher interest rates than personal checking accounts, as well as features such as:

  • Check writing
  • Debit cards
  • Online banking; and
  • Mobile deposits

Be sure to compare the features and fees of different accounts before deciding which one is right for you.

Small Business Banking FAQs

Do You Need Both Business Checking and Savings Accounts?

If you’re a sole proprietor with very limited financial needs, you may get by with just a personal checking account. However, most small businesses will benefit from having both a business checking and savings account.

Of course, every business is unique, so it’s important to talk to your bank about which accounts would be best for your situation. 

They can help you understand the benefits of each type of account and make recommendations based on your specific needs.

What’s the Difference Between a Bank and a Credit Union?

Banks and credit unions are both financial institutions that offer similar services, such as:

  • Checking and savings accounts
  • Loans; and
  • Investment products 

However, there are some key differences between the two.

  • Banks are for-profit businesses owned by shareholders. Credit unions are not-for-profit organizations owned by their members.
  • Banks typically have more branches and ATMs than credit unions. Credit unions typically offer higher interest rates on savings accounts and lower interest rates on loans.
  • Banks are regulated by the federal government. Credit unions are regulated by the National Credit Union Administration (NCUA).

Should I Open an Online Business Account?

Whether you should open an online business account is a valid question with many factors to consider. 

There are many benefits to opening an online business account. For one, it's a great way to build your brand and establish yourself as a credible business. Plus, an online account can help you reach a wider audience and make it easier to accept payments.

But, there are also some downfalls to consider. You may be subject to higher fees than with a traditional brick-and-mortar account. And you'll need to be extra careful about security since online businesses are often targets for cybercrime.

So, what's the verdict for your business?