Why do I need a business bank account?
If you’ve ever owned a business, you will know that, sometimes, there is no line drawn between your business and personal expenses. Especially when you are just starting out, people tend to pay for everything out of the same account. It gets even worse when the business is not making any money, and you find yourself paying for everything from whatever personal income or savings you might have.
I’ve been there, and I can tell you that best practice is to set up a business bank account from the very beginning. My top 3 reasons to set up a separate account for your business are:
- It’s easier to keep track of business expenses. This is going to be extremely important for tax purposes.
- Keeping track of business income and expenses also makes it easier to prepare profit and loss statements, which you’ll need to see how well the business is doing. Potential lenders and investors will definitely ask for this, and so, it’s best to have the information handy from the get-go.
- Speaking of lenders, if you get approved for a business loan, they won’t deposit the funds into a personal account.
Which bank should I use?
So, where should you set up your business bank accounts? I have had accounts at several banks, and I can tell you that it’s best to have an account with the following two types of banks:
- A large bank that can be accessed anywhere in the country. I would use this bank for ease of sending and receiving funds. I have found Chase to have higher limits than many large banks when using Zelle. It has been a real time saver to be able to send money easily.
- A credit union or small community bank. I would use this bank to build banking relationships and access to funds. Credit unions that offer business solutions might be able to offer loan products with more favorable terms than larger banks. Small community banks might be able to offer more personalized service which is extremely helpful when you are trying to access capital and grow your business.
Which credit card processor should I use?
I have only used Square to process credit card transactions from clients. As you probably know by now, I tend to stick to things as long as they work for me. Square was easy to set up and use. However, I know several people use PayPal. Both of them, however, come with a very nice bonus that can be helpful when you are trying to access capital. They can immediately provide you with financing based on the volume of transactions that you run through them.
Now, there is a whole section on financing so don’t worry about that right now. I only mentioned credit card processors because that’s something to consider, as well, when setting up your business accounts. You want to make sure you can get paid!