Online Business Bank Account. Big words. Sounds scary. Sounds complicated. Why deal with it? You are perfectly fine where you are with your business.
What if an online business bank account could help you save your time and energy when it comes to file taxes and balancing your books? What if an online business account could help you obtain a small business loan and provide the necessary funds for its growth? What if it’s actually a quick and easy process?
Yes, then it’s a completely a different story.
Keep on reading and see it for yourself. Learn what an online business bank account is, how to open one, and discover details you should pay attention to. Let’s get started!
What is an online business bank account?
As a small business owner, you need to keep your finances organized and protected, and most importantly, separated from personal finances. An online business bank account will help you keep your business records organized. You can track your incomes and expenses, and have everything ready when the tax time rolls around. Also, it will allow you to apply for a business credit card, and make you more eligible for a business loan when the time comes. Finally, with a business account, you will look more professional in front of your suppliers.
Nowadays, banks offer various online business bank accounts, so finding the right one can be confusing and overwhelming. Where to start?
Things to consider when selecting your business bank account
First, let’s dive deeper into what a business bank account involves. They all have the characteristics listed below, but with different offers and figures. Don’t worry, it’s a no-brainer: just read carefully and pay attention to the details.
- Number of monthly transactions allowed
If you want to open a free business checking account, then you should pay attention to how many transactions you are allowed to make for free every month. The term “transaction” refers to electronic payments, cash and check deposits, transfers, and cash withdrawals.
There is usually a limit to the number of monthly transactions you can make before a bank makes you pay a fee for every transaction. Likewise, there is usually a certain number of transactions you need to make to qualify for a free account.
Therefore, think carefully about how often you will use your bank account. Also, make sure you read the small print on your business checking account agreement to check if the number of transaction fits your business needs.
- Opening deposit
Another factor that varies when opening an online business bank account is the opening deposit amount. The downside with accounts with not many fees is that they require a larger opening deposit, a difference from accounts with higher or a lot of fees.
However, some banks offer sign-up perks, such as a cash bonus in case you deposit and maintain a certain balance. So, it would be good to look into several banks and choose the most convenient option.
- Average required account balance
When it comes to the average account balance, pay attention to your daily and monthly account balances. If they are high enough, you can expect fewer or no fees.
This is how banks usually make calculations: as for the average daily account balance, they add up your closing balance on every day of the bank statement period and divide that amount by the number of days in that period. As for the average monthly account balance, banks add your daily closing account balances throughout the month and divide that amount by the number of days in that month.
However, there are some other factors to consider, such as whether your balance is divided among different accounts, so get to know the bank’s specific policy.
- Availability of physical branch
Depending on the type of business you have and your revenue manipulation, you may need to go to the bank to make deposits. This usually applies to businesses with a physical office or storefront and businesses that operate with cash as a considerable part of their revenue. In that case, the best option would be to look for a nearby bank with several branches in your state.
On the other hand, if you have an online business and sell your products or services in the form of digital transactions, then opening an online business bank account not only is the perfect and less expensive option for you, but also you probably don’t need to worry so much about the availability of a nearby physical branch.
- Bank size
Another point to consider when setting up an online business bank account is the size of the bank institution. Would you like to work with a large or a small bank?
There’s no right answer: both have their own advantages and disadvantages. In small banks and community banks, you will get to know the staff and get a better service, or even some convenient deals. But, maybe they won’t be so transparent with all the fees.
On the other side, big banks provide more information about your account. Therefore, you should consider your priorities when opting for a small or a big bank.
- Connection with accounting and payment software
High-level organization sounds like a life-saver with all these figures and paperwork, right? That’s why you should look for an online business account that can be integrated with some accounting and payment software.
These tools will save your time and effort when it comes to filing taxes and balancing your books because all the payments and money withdraws will be processed and displayed right away.
Let technology be your finance assistant while you focus on your business growth.
- Other requirements: EIN a Social Security Number
Have in mind that if your company is a corporation, partnership or LLC, you must present an Employer Identification Number (EIN) to obtain a business bank account. An EIN is basically a Tax Number: a 9-digit number used to identify the company for banking and taxation purposes.
Sole proprietors that do not have a Tax Number may use their Social Security Number to open a business bank account.
Where to set up an online business bank account
Choosing the bank that offers the most convenient conditions for opening an online business account is another important piece of the puzzle. Here are some of the best options:
Chase Total Business Checking is a perfect option for relatively new or small businesses. This business account offers convenient conditions, such as a daily balance of $1,500, a $25 opening fee and up to 100 monthly transactions without a fee, plus unlimited electronic deposits. Also, Chase bank has many branches and ATMs nationwide, so it’s easily accessible and you can quickly get your job done.
Wells Fargo Simple Business Checking is the ideal solution for very small businesses with limited banking activity, or for home-based businesses. This bank account has very low requirements, like a $25 opening balance, a monthly account balance of $500 and a $10 service fee. Just make sure to check the fees since they vary depending on location.
Capital One Business Checking is a convenient option for businesses that deal with a considerable cash flow and a high number of transactions. This bank account offers unlimited transactions, free of charge when you make $5,000 in deposits every month, and with a $1 fee for every $1,000 deposited afterward. The monthly service fee is $15 unless your average balance is $2,000 or more.
How to set up an online business bank account
Now that you have gained theoretical knowledge, it’s time to take action and open an online business bank account. Just follow these instructions and you’ll be good to go.
# 1 Find the right type of bank account
The first step in opening an online business bank account is to figure out the kind of account you need that best suits your business needs. In order to make the right decision, consider the factors mentioned above, like the opening amount, the average account balance, the number of transactions allowed, the availability of the bank institution and its integration with different software.
This may be overwhelming: the best approach is to jot down your financial goals and business needs according to these parameters.
# 2 Find the right bank institution
Once you’ve figured out your business needs, it’s time to find the bank that can satisfy those requirements. Luckily, nowadays there are plenty of options and banks that offer different programs for small businesses. We listed some of the best choices previously.
Therefore, once you have listed your business needs and possibilities, go through the bank programs one by one to find your perfect match.
# 3 Set up an online business bank account
Finally, the last step! After this decision-making process, this is a pretty straightforward and quick process. It will slightly vary from one bank to the other, but basically, you will have to click on “Open account” or “Apply now” once you are in the online bank tab of the bank website you chose. Fill in the required basic information about you and your business: name, address, date of birth, Social Security Number or Tax ID Number, citizenship info, ownership percentage, driver’s license/state ID… the requested information will be more or less exhaustive depending on the bank of your choice. Then, you can make your first deposit (or opening deposit, if required). That’s it! You can start using your online business bank account!
Now that you know how to set up an online account, learn here how to manage it to improve your chances to get a business loan.
See? Not so scary. Not so complicated. And just think about the benefits an online business bank account brings.
When applying for a business loan, your lender may require to access the last 6 months of bank transactions, and you can only do that with an online bank account. In other words, it can get you closer to the business loan you need to grow your business.
If you want to find out more about useful small business resources and educational tools that will help your business thrive, sign up for the Camino Financial Newsletter right away!