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Best banks for small businesses in 2022

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Small business frame owner doing finances
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Anyone who runs a business with fewer employees or less revenue than a corporation or regular-sized business is considered a small business owner. If you fall into this category, you might be thinking about where to open a business account.

While the definition of a small business is somewhat loose, small businesses tend to operate on a more limited scale with fewer employees and may not have the same resources as a corporation or bigger business. Still, small businesses comprise a large portion of the business world. According to the U.S. Census Bureau, the majority of U.S. businesses have fewer than five employees — making up for 54.4 percent of businesses in 2018.

The COVID-19 pandemic had a significant influence on the growth of small businesses — especially online businesses. There were 2.8 million more small online businesses started in 2020 than in the previous year, according to a survey by Venture Forward, a research initiative by the web hosting company GoDaddy. Of these businesses, 90 percent have 10 or fewer employees, and roughly one-fifth were started by people who are otherwise unemployed, an 8 percent increase from before March 2020.

Opening a bank account for a small business is an essential step to help manage the business and keep its finances in order. If you’re a small business owner looking to find the right business account, here’s where to get one, what to look out for and how one of these accounts can help you.

What is a small business bank account?

Business accounts are similar to personal accounts in many ways, but there are some key differences.

A business owner will need to submit additional paperwork to open a business account, to verify that they own a registered business. After opening the account, it will be under the owner’s name as well as the name of the business associated with it.

While there may be higher fees on a business account, having one helps ensure that business transactions are kept separate from personal finances. An account with the business name attached to it can lend the business greater professionalism and help customers feel assured in writing a check or making peer-to-peer payments to the business. Plus, it can help boost the business’s credit rating.

Some banks offer accounts specifically tailored to smaller businesses. They may come with less complex features, limited free transactions and lower or no monthly fees.

Key statistics:

  • 77 percent of small business owners take on the day-to-day accounting for the business themselves, according to a survey by Bluevine, a fintech company.
  • Nav’s 2018 Business Banking Survey found that 70 percent of small business owners who applied for a business loan without a business checking account were turned down.
  • 47 percent of small business owners choose to open a business account with the same bank they use for a personal account, according to the Nav survey.
  • Most small business owners (60 percent) check their business account at least once a day, according to the Nav survey.

Top banks to open a small business account with

Several banks and credit unions offer business checking accounts that are especially suited to small business owners.

Here are some of the top options to choose from, along with what fees there are to look out for and what perks they come with.

Bank account Monthly fee Minimum balance requirement Transaction limits Additional features
Chase Business Complete Banking $15 (waived if certain criteria are met) None, but $2,000 daily balance required to waive monthly fee Unlimited free digital transactions;

20 free transactions by teller or paper check, 40 cents per transaction after

Associate Debit cards available

Accepts credit card payments with Chase QuickAccept

Comes with fraud protection services

Capital One Basic Business Checking $15 (waived if certain criteria are met) $250 to open, $2,000 daily balance required to waive monthly fee Unlimited free digital transactions Free business debit cards

 

Bethpage Federal Credit Union Free Business Checking None None Unlimited free transactions Earns 0.20 percent APY

Free business debit card

Axos Basic Business Checking None None Unlimited free digital transactions Comes with free set of 50 checks

Unlimited domestic ATM fee reimbursements

LendingClub Tailored Checking $10 (waived if minimum balance is met) None, but $500 daily balance required to waive monthly fee $10,000 in incoming and $10,000 in outgoing transactions per day Earns 0.50 percent APY on up to $100,000, and 0.10 percent APY on any balance over

Unlimited domestic ATM reimbursements

U.S. Bank’s Silver Checking Package None $100 125 free transactions per month, 50 cents per transaction after 50 percent discount on first check order up to $50

Comes with check fraud prevention tools

Benefits of a small business banking account and why you should get one

There are four primary benefits of having a business account for your small business that the U.S. Small Business Administration lists:

  • Protection
  • Professionalism
  • Preparedness
  • Purchasing power

Keeping a business account separate from any personal accounts can help protect business transactions from getting lost or mixed up with a personal transaction. It’s easier to track expenses and look out for errors when you have all your business transactions in one place. Plus, if you face a personal financial crisis, it won’t negatively affect the business’s credit score.

Business accounts help give businesses a more professional image. Clients can write checks out to the business, rather than to a personal account. Having a professional account may also mean securing better deals for your business, not the least of which is being approved for a business loan. With 70 percent of business owners getting turned down for a loan if they don’t have a business account, whether you have one of these accounts can have a serious impact on your ability to cover business-related costs.

The U.S. Small Business Administration states that business accounts help business owners stay better prepared for emergencies, because they often come with a line of credit option. U.S. Bank, for example, offers four types of lines of credit for businesses, which can help manage cash flow, protect from overdraft charges and purchase materials.

A business account can also lend the owner more purchasing power by establishing a good credit history. With a separate bank account comes a separate business credit score, which lenders use to assess the creditworthiness of a business. Better credit may provide access to more funding.

One final benefit of having a business account is taking advantage of tax deductions. If you report tax deductions for a business from a personal account, it may trigger an audit. Some valuable small business tax deductions include utility costs, inventory expenses and loan interest.

Small business checking accounts vs. small business savings accounts

While business checking accounts are a must for managing the daily expenses and transactions for the business, it can also be a good idea to open a business savings account to store earnings that won’t be needed on a whim. The money in a business savings account can serve as an emergency fund or savings for large future expenses.

Business savings accounts may also come with benefits that aren’t offered through a business checking account, such as higher annual percentage yields (APYs). They may not be worth it, though, if you can’t meet the minimum balance requirement to avoid a fee.

Here’s a breakdown of the different uses and benefits between business checking and savings accounts:

Small business checking account Small business savings account
Primarily for everyday transactions Primarily for storing funds
Lower APYs (and often noninterest bearing) Higher APYs, which can be part of an investment strategy
Check-writing privileges Limited withdrawals allowed per month (typically six)
Higher liquidity, since it allows for frequent debit and credit card transactions Better for saving for future expenses or emergencies

Frequently asked questions

Bottom line

With millions of new businesses opening every year, they occupy a significant role in the economy. Most of the owners of these small businesses handle accounting for the business themselves — and with all the responsibilities that come with running a business, finding a business account that suits the business’s needs can help make managing its finances smoother.

It’s important for small business owners to open a business checking account that can be used for sending and receiving payments under the business name and for taking out business loans. When shopping around for the right business account, look for what fees it comes with, transaction limits and what features the account has to offer.

Depending on the business’s needs and earnings, you may also want to open a small business savings account. Just make sure you can meet the minimum requirements to avoid paying a monthly fee.

Written by
René Bennett
Banking writer
René Bennett is a writer for Bankrate, reporting on banking products and personal finance.
Edited by
Managing editor