This article is part of a larger series on Business Banking.
The best bank for your business is the one that can meet most, if not all, of your business’s banking needs. It’s important to consider a bank that can help keep your finances in order and give you access to business loans and other financial products. You also have to decide which type of bank will suit you best—either a traditional bank, digital bank, or credit union.
With this in mind, here are the important steps to choosing a bank for your small business.
1. Evaluate Your Business Needs
Each business has unique banking needs, and the right bank will depend on how your business operates. Not all banks offer products and services that can meet your business’s needs. Whether you’re opening your first business bank account or changing banks, it’s important to first evaluate your business activities, growth, and both short and long-term needs.
For instance, if your business needs funding, it’s best to choose a bank that has a wide selection of business lending options. Sole proprietorships and small businesses that don’t process cash transactions frequently may want to consider going with an online-only bank. However, companies that handle cash need a bank that can accommodate cash processing with in-person branches.
2. Understand the Different Types of Banks
When choosing a bank for your small business, you also need to know and understand the different types of banks. Traditional banks offer full-service business banking, including in-person branches. Online-only banks don’t have physical branches, but they usually have fewer fees and better savings account interest rates.
Other business owners prefer to bank with credit unions, which offer products and services similar to most traditional banks but have a more intimate customer service setup like small community banks. While each type of bank works differently in terms of features and ease of access, you can get most basic business banking services at any type of bank.
Most of the largest banks in the United States are traditional banks. They are insured by the Federal Deposit Insurance Corporation (FDIC) and offer a full array of business banking products, including business checking accounts, credit cards, business loans, and mobile banking. Traditional banks usually have several branch locations available, making them ideal for businesses with heavy cash transactions and those that prefer in-person banking over digital. They are the go-to banks when you’re looking to cover all available business banking services.
Online-only banks offer a range of banking options without the brick-and-mortar branch locations. Most digital banks charge lower account fees and transaction costs, and some even offer a free online business checking account. Online-only banks typically offer better rates on interest-bearing accounts than traditional banks. Digital banks are great for small businesses that don’t need physical branch banking. Some online banks offer limited cash deposits through third-party businesses. However, this usually takes more time to process and often has associated costs.
Credit unions are nonprofit organizations that have members instead of customers. Credit unions are often smaller than traditional banks, and they cater to members that meet specific membership criteria, like location requirements or company affiliations. These organizations continue to have strong reputations for intimate banking and offer easier access to business lending over traditional banks. If you have a qualified credit union in your area, it’s worth considering, especially if nationwide accessibility is not your priority.
3. Important Factors to Consider While Shopping for Banks
When deciding which bank to open a business account with, you’ll need to consider important factors that could affect your overall banking experience. These factors include banking products and services offered, network size and availability, account features, opportunity to earn interest on accounts, and fees. You’ll also need to review how the online banking and mobile experience will accommodate your business’s needs. It’s also best to find out if the bank offers lending options and if it can scale with your business’s growth.
Here are the factors that you should consider before you choose a bank for your small business.
Financial Products & Services
Find out the types of bank accounts and loan options being offered by the bank. While some banks have multiple account options for business, other banks don’t offer complete business banking products, which may not be an issue if you don’t need all of them. However, if you want to keep all your banking transactions in one bank, you need to ensure that the bank offers all the products and services that you may need, including:
- Business checking accounts
- Business savings accounts, including money market accounts and certificates of deposit (CDs)
- Business loan options
- Business insurance
- Commercial real estate financing
Network Size & Availability
Consider how you can access your money and the bank’s services before deciding on a bank. If you travel frequently but still need in-person branch banking, make sure to choose a bank that has several branches and a large ATM network across the country. Similarly, if you need a joint business bank account, choosing a bank with locations that are accessible to all account owners may be helpful. If you are OK with doing your banking transactions online, an online-only bank may be a more practical choice.
Rates & Fees
An account that provides an opportunity to earn interest is essential if you want to get the most out of your deposits. Find out if the bank offers interest-bearing accounts and what their corresponding interest rates are. Also, understand the bank’s account fee structure, such as whether fees are charged for monthly maintenance, excess transactions, and falling below minimum balances. There are business banks that offer accounts without fees except for special transactions like wire transfers and cashier’s checks. Whichever bank you choose, make sure that it can help you maximize your earnings and minimize your costs.
Online & Mobile Banking Experience
Some banks offer the best online and mobile banking platforms that include features like bill pay services, two-factor authentication, a user-friendly interface, and online customer support. A good online banking experience means you can view your business activity, make payments and complete other financial transactions online, and reach customer service easily—all in a secure environment. If a bank doesn’t offer an online and mobile banking platform that’s safe and easy to use, that could be a deal-breaker.
The best business banks offer app integration with a variety of accounting software and other business tools that makes it easier to consolidate your business accounting and transactions. Although most banks offer some type of QuickBooks integration, the banking platform may not connect with your specific accounting software. If software and payment services integration is a priority, you should ensure that you can integrate your software seamlessly with the bank’s platform.
Scalability & Support for Future Needs
As your business grows, you’ll need a bank that can accommodate that growth. A bank that has multiple account options, or one that can accommodate more banking transactions, is an ideal fit for growing businesses. You’ll also want to ensure that your bank provides a variety of business loan options that can support your business’s future funding needs.
There are banks that have specific experience in different industries. If a bank specializes in your industry, that means it offers products and services that can directly meet your needs. For example, if you are in a real estate business, you may want to work with one of the best banks for real estate investors because they offer account options and investment property loans that make managing real estate finances easier. Finding an industry-specific bank may not be required, but if you can find one, it could be a great option for your business.
4. Open an Account With Your New Bank
Once you have considered your options carefully, you can open your business bank account with the bank that best suits your business. You’ll need to prepare your personal and business documents, including identification, business license, and articles of organizations, for you and your business partners. Some banks allow you to open an account online while other banks require you to open an account at a branch.
Best Banks to Choose for Your Small Business
The best banks for small businesses offer a variety of accounts and loan options for businesses as well as other perks and services that focus on business banking. Working with one bank that can meet all your business’s needs provides more convenience than opening several accounts with multiple banks.
We’ve evaluated several traditional banks, online banks, and credit unions to help you choose the best institution for your needs:
- Best Banks for Real Estate Investors
- Best Banks for Nonprofits
- Best Bank Accounts for Self-employed Professionals
- Best Credit Unions for Small Business
- Best Business Checking Accounts for limited liability companies (LLCs)
- Best Online Business Checking Accounts
- Best Free Business Checking Accounts
- Best Small Business Checking Accounts
- Best Business Savings Accounts
- Banks That Don’t Use ChexSystems
Can I Use a Personal Bank for My Business?
Most banks offer both personal and business banking products and services. However, you shouldn’t use a personal bank account for business banking because it can create accounting conflicts and cause issues with the IRS. Opening a business bank account allows you to keep business and personal finances separate, which is essential if you want to build business credit, keep your business accounting seamless, and avoid tax issues.
When choosing a bank, it’s necessary to do proper research first and consider several important factors such as the account and loan options available, accessibility, customer service, earning potential, and fees. The best bank is the one that can meet your business’s banking needs at the lowest cost.