Opening a small business is a major undertaking. Deciding on a concept, a business type, and your list of offerings is typically a lot of fun, and building a great team can be very rewarding, too. But there’s a lot of money management, accounting, and paperwork to be done in any business, and it’s important to choose the right partners to work with.
Finding a trusted accountant is important and will take infinite weight off your shoulders at tax time, and finding a lender to help you with small business loans can help you get your business off the ground. But it’s also extremely important to find a bank that’s able to support your business goals, not impede them.
New businesses have a lot of startup costs to contend with, so every penny counts. Finding a financial institution with fee structures, interest rates, and perks that work for the specifics of your business and your income helps small business owners find success.
We’ll walk you through it.
Banking for small businesses
Small businesses need banks that understand their needs, and the range of services, fees, and perks available is staggering.
Regardless of which type of bank they choose, the Small Business Administration advises every business to keep a business bank account (or a few) to keep their business finances in order and absolutely separate from their personal finances. This makes life much easier at tax time.
Some types of business bank accounts that benefit small business owners include:
Business checking accounts
Business savings accounts
Business credit card accounts
Merchant services accounts (which allow businesses to accept debit and credit card payments)
Some businesses prefer to work with banks with big names that they recognize and branches all over their city. Increasingly, though, small businesses are leaning on online-only banks with lower fees and higher interest for their business checking accounts, or turning to local credit unions with strong reputations among businesses in their area.
How to choose the best bank for your business
Determine your financial goals (both short- and long-term!)
The first thing to consider when choosing a small business bank is your business’s short- and long-term financial goals.
Some short term goals to consider:
Reach 10% net profit within six months
Increase staff pay by 15% within a year
Reduce overhead costs by 5% within six months
Pay back friends-and-family investments within 18 months
Secure business financing to get new equipment
Some long-term goals:
Reach 20% net profit within 5 years
Manage cash flow more efficiently with a new POS platform
Expand to a second (or third, or fourth) location
Increase customer retention by 20%
Renovate your current location
Expand into a new revenue channel or product line
Choose a few major goals to focus on and bring those to your potential bank partners. Ask them specifically how they can help you reach them.
Decide on your banking must-haves
Aside from ensuring your bank of choice is FDIC-insured, every business will have slightly different banking needs. Some types of businesses will be okay with transaction fees after a certain number of free ones, because they never go over the limit. Others will do so many transactions each month that they’ll need unlimited transactions to ensure they don’t end up in fee hell.
Some businesses will need a bank that connects easily to their accounting software, or one with a great online banking app. Others will be looking for a bank that can also help them with capital management and merchant services.
Figure out your must-haves and keep reading to learn more factors to consider, and then check out our list of five great financial institutions for small business banking.
Keep fees in mind
There’s a lot of fees to understand when comparing various business banking options. They all can add up very quickly and increase your overhead costs, so choose a bank with low fees, or even a fee-free bank when possible.
Some fees to understand:
Monthly maintenance fees (also known as monthly service fees). These fees are charged simply for having an account open, and they are automatically taken from your account every month. Not every bank charges these fees, and it can be worth looking for one that doesn’t.
Minimum balance requirements (and fees). Some banks, and some bank accounts, require owners to keep a daily balance or monthly balance above a certain threshold (for example, $5000). If your balance dips below this threshold, you’ll be charged a fee.
Cash deposit fees. Some bank accounts will charge deposit fees. Some accounts give the owner a certain number of free deposits each month, and then start charging for deposits once the number has been exceeded. Others do it with a dollar amount - it’s free to deposit until a certain dollar threshold, but after that, fees will start to accrue with deposits.
Transaction fees. Many banks charge transaction fees. Some offer a certain number of free transactions and then start charging, while others charge from the beginning. Especially when banking for a business, it makes sense to look for a bank with free transactions.
ATM fees. ATMs often charge service fees unless they’re being used with a debit card from the same banking institution. These can really add up, with ATM withdrawal fees going up as high as $3 or $4. Some banks offer free ATM withdrawals (through a network called Moneypass), or ATM fee reimbursement at the end of the month.
Overdraft fees. These fees can be avoided with careful money management, but they are charged by almost all banks. They happen when a person’s account doesn’t have enough money in it to cover a payment that they’ve made.
Minimum opening deposits. Though they’re not technically a fee, this stipulation means that you need to bring a certain amount of money to the bank in order to open the account at all.
Startup fees. This is a one-time fee charged by many banks in order to cover the cost of opening your new account.
Wire transfer fees. These fees are charged for sending and receiving wire transfers. Some banks offer a few free transfers and then start charging, while others only charge for outgoing transfers and not incoming ones.
Check for convenience
It’s important to make sure your bank is easy to work with, as you’ll likely interact with your bank in some capacity many times a week, if not daily.
Some banks have great online portals. Others encourage their clients to use their app for the best experience. Other banks focus on an in-person approach, in which case you should ensure the branch and ATM locations are convenient for you.
Consider how you like to do business, and keep that in mind when choosing your bank.
Look at the perks
Banks are businesses too, and they have to offer perks and promotions as a way to attract new clientele. These perks can really add up — in a good way — so consider the perks available when choosing which bank account to sign up for. Some common perks offered by banks include
Cash back. Some bank accounts and business credit cards will offer a certain percentage cash back. If an account gives 1% cash back, that means 1% of all money spent from that account will be paid back to you at the end of the month. For a business that’s spending $2000 each month, this can mean $20 back for free at the end of the month.
Interest. As a thank you for choosing their bank, some financial institutions will offer a certain percent of interest to be paid to an account owner at the end of a month or year. The amount of money paid in interest will be a percentage of how much money is in that account. This is most common on business savings accounts, but also can be found as a perk on business checking accounts.
Free or discounted account offers. Banks can offer discounts on monthly fees, new account activation fees, transaction fees, and more — or waive them altogether with offers like free cash deposits.
Introductory offers. Some banks offer promotions and discounts to new clients. Some waive fees, while others offer cash bonuses for qualifying account owners. Find out what bank offers are available from a few banks you’re considering and add up the rewards.
5 popular banks for small businesses
Novo is a top choice for small business banking. Their business bank accounts come with a free business debit card, and they can be opened with an easy online signup. There’s a $50 startup fee, but no monthly fees, no mobile check deposit fees, and no minimum balances to worry about. They charge a $27 overdraft fee, but it can be avoided through careful financial planning. Novo refunds all ATM fees at the end of the month, has an excellent app, and integrates with Stripe, Shopify, Slack, and many other business tools that are particularly useful for online businesses. Novo also helps small businesses with invoicing.
Capital One is a good option for small business banking. They offer options that include low fees or no fees (if your account has a certain amount of money in it or you deposit less than a certain amount each month), free withdrawals from 39,000 AMs across the country, easy accounting software integrations, and they have support for merchant services and capital management as you grow your business. The downsides of Capital One is that you have to open an account at a physical branch, and that they do charge monthly fees if your balance dips below the threshold.
They have several options for businesses, including a Basic Checking account and an Unlimited Checking account, with different fees and perks.
Bluevine is a small business checking account that new business owners can open in minutes. They charge no overdraft fees, no monthly fees, and have no minimum balances, and they allow unlimited transactions. They also offer the ability to earn 1.5% interest on your balance up to and including $100,000 if you meet a monthly activity goal.
Bluevine has no branches, as it’s an online-only bank, and they also don’t offer savings accounts. They do integrate with PayPal and Stripe, and offer no-fee withdrawals at 38,000 ATMs through Moneypass.
NBKC is another bank that can work well for small businesses, as they're known for their customer service tailored specifically to the needs of small businesses. They offer business checking accounts and money market accounts, which can both be opened online. They have no minimum balances, no overdraft fees, no monthly fees, no transaction limits, and no domestic wire transfer fees.
Lending Club, formerly known as Radius, offers banking services for small business banking. With their business checking accounts, you can receive an annual percentage yield (also known as APY or interest) of 1% up to $100,000, which means your business could gain an additional $1,000 a year just for holding your money at Lending Club.
They return ATM fees at the end of the month, and allow account owners to earn interest with great savings accounts. They do charge a $10 monthly fee, but it’s waived for accounts with more than $500 in them. They also have unlimited transactions and an excellent app, as well as options for business lending and cash management.
Small businesses need great financial partners
Banking services are a critical part of running a successful business. Opening a small business checking account is an early step in the process of starting a business, and choosing the right bank to work with can save you — or even earn you — hundreds or thousands of dollars a year.
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