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- Some business lenders require applicants to have a business checking account
- A business checking account is recommended to track expenses, monitor spending and maximize business tax deductions
- Business checking accounts often offer services like payroll processing and bookkeeping integrations to simplify business owners’ workflow
Whether you’re a small business owner or sole proprietor, having a business checking account is a great way to keep your finances organized and ensure that transactions are processed efficiently. You might also need a business checking account when applying for a business loan since many lenders require it. The lender may require you to show bank documentation of your recent deposits and expenses. Some fintech lenders even connect directly to your business bank account to see your transactions firsthand.
When choosing a business checking account, consider a variety of factors including the bank’s fees, interest rates, other business products and locations (if any). Let’s take a closer look at the basics of business accounts and how to get the best business checking account to match your needs.
How does a business checking account work?
A business checking account allows for payments to be made from the business. It also enables many transactions, such as paying employees and vendors, managing business transactions and providing a source of truth for accounting and filing taxes. The business bank account also facilitates ACH transfers and wire transfers for larger transactions.
Some business banking accounts also come with additional perks, such as sign-on bonuses for meeting spending requirements or employee debit cards with preset spending limits. You can also find interest-bearing business checking accounts, allowing you to earn money on your available balance. Interest-bearing checking accounts may not earn interest rates as high as business savings accounts. But they can help you maximize earnings on both your checking and savings.
Business checking account vs. personal checking account
Business checking accounts and personal checking accounts work similarly, allowing for deposits, withdrawals, check-writing, ACH transfers and debit card payments. But many business accounts also have more robust features designed to make the business owners’ day-to-day operations easier.
Those features may include:
- Employee debit cards with spending limits
- Bookkeeping integrations
- Merchant services
- Payroll processing
- Financial advisory services
You can find more personal checking account options without monthly fees or minimum balances than business checking accounts. These features are available with business checking accounts. But many business accounts set high balance requirements or offer tiered interest rates for meeting a higher balance.
Opening a separate business bank account makes it easier to track expenses and monitor spending. Separating business expenses from personal expenses is also important to analyze the company’s finances for revenue projections, finding tax deductions and being prepared for future tax audits.
If you’re deciding whether to use a personal checking account for business purposes, you’ll want to read the bank account agreement closely. Some banks restrict the use of personal accounts for business purposes.
What do I need to open a business checking account?
When opening a business checking or savings account, the bank will request certain documents and forms to be filled out and signed. The main information the bank will need includes:
- Personal ID for any key business stakeholder
- Employer identification number (EIN)
- Proof of business formation
- DBA document (Doing Business As), if applicable
- Deposit amount
These documents provide information about the business, its owners or partners and key leaders in management. The major stakeholders from the company will also need to sign the bank agreements, giving consent to open the account and authority to manage it. They should be prepared for the bank to check their banking and payment history.
How to get a business checking account
The process for opening a business bank account is straightforward but can take time when comparing depending on the features you need from the account. Here’s a look at how to get a business checking account:
Compare business checking accounts
The first step to getting a business checking account is to compare the best accounts across different banks with the features that complement your business. Areas to look for include:
- Minimum balance requirement: Most business accounts require a minimum amount to either keep the account open or avoid a monthly maintenance fee. The amounts can range anywhere from $5 to $50,000 or more.
- Interest rate: You can find interest-bearing business checking accounts with rates typically ranging from 0.2 percent to 2.0 percent. Accounts with the highest rates are more common with online banks than traditional banks.
- Bank fees: Fees to look for include monthly maintenance fees, fees for bounced checks, transaction fees and fees for writing a check beyond the number allowed per month. Some banks offer free business checking accounts without monthly fees, though these may not offer interest or other desirable features.
- Bank locations and ATMs: If the business owner often travels and uses out-of-network ATMs, it’s important to find a bank that doesn’t charge fees for this type of usage or has a large enough ATM network to make fees infrequent.
Bluevine is a popular fintech company known for offering a business line of credit to borrowers with fair credit and above. But it also has a business checking account that can earn 2 percent interest on balances up to $250,000. To qualify, you’ll have to spend $500 per month with a Bluevine Business Debit Mastercard® or deposit $2,500 per month in customer payments to your Bluevine checking account or sub-accounts.
Gather business documents
The next step is to gather the required documents to apply, including tax forms, the business license and a business checking account application. Many banks will list the documents required online, saving you time during the application process.
Complete the application
Many banks let you open a business checking account online. But you may need to go in person for accounts with a traditional bank. In this case, you’ll work with a bank representative to open the account.
Sign bank agreements
You’ll want to read through the bank’s agreements, schedule of fees and disclosures. These documents let you know how the bank handles a variety of situations, including overdrafts, wire transfers and more. Then, sign on the dotted lines and offer your cash deposit or bank information to transfer from another bank.
A business checking account is an important tool for managing cash flow, organizing taxes and establishing your business payment history. It allows you to track business expenses and monitor spending, pay employees, vendors, and taxes, and facilitate ACH and wire transfers. Depending on the lender, you may also need one to get a small business loan. The financial records can also make it easier for you to apply for business financing later.
When opening a business checking account, evaluate the features that the account offers to determine what best suits the business’s needs. A basic business checking account offers features such as unlimited transactions, free wire transfers and check-writing. Feature-laden accounts might monitor the account for tax deductions, roll merchant services into the account or offer high interest rates.
Frequently asked questions
Not all business loans require a business bank account, but many lenders request to see bank documents showing your business’s revenue and expenses. Some business lenders specify that you need a business bank or checking account in order to apply.
Your business will need an EIN when opening a business checking account, unless you’re a single-member business like a limited liability company (LLC) or sole proprietor. In these cases, the bank may accept your Social Security number when opening the account.
You can use a business checking account for paying suppliers, receiving sales revenue, payroll processing, bookkeeping and gaining access to financial advisory services. Most business checking accounts come with basic account viewing and transactions, but other features like bookkeeping integrations depend on the account you’re comparing.