Do You Need a Business Checking Account for Your Startup? It Depends on These 8 Factors.

When you're establishing your startup, it can be a challenge to choose the right bank and the right business checking account, particularly if you have limited business experience. You need a bank account that not only meets your current needs but will also grow as your requirements evolve with your expanding business.

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By Baruch Mann (Silvermann)

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When you're establishing your startup, it can be a challenge to choose the right bank and the right business checking account, particularly if you have limited business experience. You need a bank account that not only meets your current needs but will grow as your requirements evolve with your expanding business.

You might be wondering if you need a business checking account. While a personal checking account will perhaps meet your needs for your basic day-to-day business activities, you need to consider whether you need a business loan in the future or want to hold profits in a savings account.

Your new checking account can be the start of your banking relationship, so you can start to establish goodwill and trust. However, while the bank is important, the characteristics of the checking account are also vital. So, here we'll explore how to choose a business checking account for your startup.

Think about what you need from your bank

The first thing you need to consider is what you need from your bank. Are you just looking for a checking account or do you also need a small business loan? There are lots of banks that not only offer a variety of business checking accounts but also have great business product lines such as business loans and lines of credit, business credit cards and tax counseling.

While you may be looking for a checking account to handle your checks and manage client payments, you may need a line of credit or other products in the immediate future. So, take some time to think about your immediate and potential future needs to see which banks can meet your requirements.

Once you have a short list of things you need from your bank, you can start comparing the offerings from different banks both in your area and nationally. If you are considering a couple of banks, you can speak to their customer support team and obtain product information or even schedule a meeting to discuss your requirements.

However, if your startup will only require basic account services, you could consider online banks. These tend to offer various products with minimal fees. The downside to this is that you don't have face-to-face interaction, and depositing cash can be tricky.

Related: 5 Signs It's Time to Switch Your Business Bank

Considerations for choosing a business checking account

1. Location restrictions

Even if you're not looking at an online bank, some traditional banks put location restrictions on certain accounts. If you're considering a business checking account that has very low fees, it is worth checking if it is online only.

Depending on your operation, you may need to speak to a bank representative in person, pay in cash or send certified checks. In these scenarios, having a business checking account that does not have branch access could be a problem.

2. Digital tools

Most modern startups benefit from digital tools such as mobile deposits, and digital bill payments. So, it is well worth assessing what digital tools are offered with the checking account.

Many banks and financial institutions have an app that allows you to manage your account on your mobile device. Make sure that you check the reviews for the accompanying app to see if there are any potential issues.

3. Fees

As with a personal checking account, the fees for your business checking account can quickly add up. For most startups and small businesses, every cent counts, so it is crucial to check the fee structure for your new checking account before you sign up. If your bank offers fee waivers for monthly maintenance charges, be sure to check the criteria to ensure that you can meet the minimum balance needed to waive it.

4. Relationship perks

Many banks offer some great perks, such as fee waivers and preferential rates if you link multiple accounts. So, it is worth checking if the bank holding your personal checking account offers relationship perks if you open a business account.

You may find that your existing bank will provide some excellent account options and since you already know and enjoy the bank, you can feel confident with your new business checking account. On the other hand, if there are no benefits to having the same bank for your personal and business accounts, don't feel obliged to stick with them.

Related: 5 Items You Must Have to Open a Business Bank Account

5. Additional debit cards

When you have a startup, you'll have plenty of administration tasks that will keep you busy every day. So, it can be very handy if you can provide your trusted team members with a company debit card.

This means that you won't need to micromanage essential purchases or deal with annoying reimbursement requests.

6. Business savings accounts

Another important consideration is whether the business checking account has an accompanying or compatible savings account. While some business checking accounts are interest-bearing, you may still have startup capital that would be better in a savings account.

A compatible savings account would allow you to keep your funds on hand for when they are needed. Some banks even facilitate automatic transfers. This will transfer funds from your savings account if the checking account balance reaches a certain threshold. This is a great feature, as you don't need to worry about going overdrawn or having payments refused, yet you can still be earning a higher rate of interest.

7. Additional resources

Finally, it is worth checking whether your new business checking account provides access to additional resources. Many banks appreciate the challenges of operating a startup and offer help and guidance. This could be something as simple as a learning center that offers live webinars, informative guides, or access to a business banking manager.

8. Business vs. personal checking account

There are several good reasons to keep a separate checking account for your business if you own one. According to the SBA, business banking offers some personal liability protection by keeping your personal and corporate funds apart. Check writing and debit cards are features that both personal and business checking accounts can provide.

A company checking account, however, could provide benefits that a personal checking account does not. While some personal checking accounts can be opened for as little as $1, depending on the bank or credit union, a business checking account may cost $500, $1,000, or more to open. Combining your personal and commercial operations in one checking account, if you plan to do both, can make bookkeeping difficult and tax season a nightmare.

Bottom line

Once you have begun your startup, you are likely to be excited to get working on your core business, but the right checking account can be an ally or a hindrance. The right checking account will provide you with the tools and services your startup needs.

Baruch Mann (Silvermann)

Entrepreneur Leadership Network Contributor

Entrepreneur, Investor, Analyst

Baruch Silvermann is a personal finance expert, business analyst, investor, digital marketer and founder of The Smart Investor. But above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.

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