Best Banks For Small Business
New freelancers, independent contractors and startup founders have many things on their plate. From figuring out 1099 forms, tax deductions, how to work from home and choosing a business bank account.
Check out this list of the best banks for small business, and a few new non-traditional banking alternatives that could satisfy your business needs.
The Unique Banking Needs Of Independent Professionals & Small Business Owners
Going solo, or even launching your own fast-growing startup can have many powerful benefits.
It provides immense freedom, scheduling flexibility, tax breaks, savings on traveling to traditional workplaces of the old industrial era, and most times the ability to make your own rules and decisions. It is your chance to make a difference, do what you are passionate about, earn unlimited income, and live out your full potential.
However, switching to this work puts a few more tasks and steps on your to-do list. If you are switching from a W2 salary, you need to understand what a 1099 form is, and whether you should be getting one, or giving them out each year. You need to choose an invoicing software, and a bookkeeping system that specializes in helping business owners. H&R Block tax preparers and DIY services like TurboTax just will not cut it anymore. You need to find a reliable alternative to Quickbooks self-employed and other preparers.
You need an accounting system to minimize liability and maximize tax savings. As well as a modern way of accepting payments, paying invoices, tracking spending, and managing your money from your phone on the go. Keeper Tax is the perfect solution for any small business to keep track of expenses and file their own taxes in the easiest way possible.
Bank Accounts For Small Business vs. Personal Accounts
Many solo entrepreneurs put off getting organized by using their existing personal checking and savings accounts. It may legally be possible to do this. Yet, it can rob you of the best benefits of being an independent business owner.
You need to have a stand-alone business bank account to simplify your cash flow. Any business attorney and tax accountant will advise to do this first. Without one, you may not accept some payments or be able to get loans, leases, and other items you need to operate.
These are four of the biggest reasons why you shouldn’t go another day without a business bank account.
If you are commingling your personal and business finances, it is going to make your bookkeeping and taxes far more complicated.
There is the temptation to dip into personal finances to fuel the business. It is hard to tell if you are making or losing a profit.
It makes it harder to pull out 1099 tax deductions and write-offs to minimize your income tax bills. You could end up paying up to tens of thousands extra each year.
Few people love tax prep, except for accountants. Mixing all of your money up means when tax time comes, you are going to lose a lot of time and money.
There are criminals looking to make a quick buck off your hard work. They could find your bank information and give them out to everyone on the dark web. Unless you want the whole world to know your personal name, address, and bank details, use a business bank account.
Any good lawyer will tell you that if you don't use a business bank account your money is not protected. You have no personal liability protection. If your business gets sued, they could take all of your personal accounts and assets. Which includes your home, furniture and car. Similarly, if you are personally sued in an accident or divorce, then they can take all your business money and assets as well. Don’t risk it all for the sake of not knowing how to choose a business bank account.
4. Small Business Loans
Having a separate bank account, even as a sole proprietor, will help get you a business loan. When choosing lines of credit you have two main options, business credit cards or SBA loans. The U.S. Small Business Administration guarantees SBA loans. They have lower interest rates, and higher credit amounts usually than credit cards. But they are harder to get for new business owners with no credit history. If you are just starting out you will get a business credit card instead.
What You Need to Open a Business Bank Account
Each bank and country can have their own requirements to open and maintain a corporate bank account.
Typically, you have to show:
- Articles of incorporation
- A good standing status of your business with your state
- Proof of hiring a qualified registered or statutory agent
- A tax ID number
- Personal photo identification
You should be able to get almost all the documents you need online.
What To Look For In The Best Bank Accounts For Small Businesses
Your exact needs vary depending on your industry, your business size, location and how tech savvy you are. Many of these banks have several business bank account options to choose from. Try not to judge a bank until you see all the account options as well.
The most important aspects when choosing a bank:
- Minimum account balance
- The minimum or maximum number of transactions and ACH transfers per statement cycle
- A high Annual Percentage Yield (APY) savings account
- Low monthly maintenance fees
- The mobile app and online banking services available
- A FDIC insured business savings account for asset protection
- Their company reputation
- Access to customer service
- No overdraft fees
- Low lender interest rates
- High business credit card cash back rates
- Ease of opening a basic business checking account
- Mobile check deposits
- Whether you want physical branches or an online only bank
- Low foreign transaction fees for business meetings outside the U.S.
The Best Banks for Small Businesses
Now we will go through and review our top choices for small business bank accounts. Review each one carefully to get a good idea for which one suits you best. Let's get the ball rolling.
Not just any Charles Schwab account, but the High Yield Investor Checking Account linked to a Schwab One Broker account. If you are into trading stocks, ETFs, options or investing in mutual funds online, then this is your best choice. Account holders have no trade or account minimums. They also let you make many online trades for free or pennies per trade. As a bonus, they don't have monthly average balance requirements, minimum opening deposits or monthly service fees. You also get unlimited ATM fee rebates worldwide, which is outstanding. The only downside is your APY for the business checking account is 0.03%. For a slightly better rate, open a business savings account for a 0.05% annual yield. Ideally you want an account that has a APY close to 2% because that is the average inflation rate. That means that you won't lose money in the long run because of rising prices. Finally, the benefit is that their business savings account is FDIC insured up to 250,000 dollars.
Capital One may not be the most prestigious bank, but they are famous for their 2% cash back Spark Visa credit card. They also have an industry leading APY of 1.85% for the Business Advantage Savings account. ATM fees are not refunded though, and there are few physical branch locations, but they have a thorough online banking program to offset that negative. If you want a low fee bank, Capital One is a solid choice to satisfy all your business needs.
*Update: Capital One is temporarily not accepting new Spark business accounts for the time being.
I know this article is about the best banks for small businesses, but Wells Fargo is too big to ignore. Their biggest perk is their sheer amount of physical branches. Their website dashboards are good too, with online bill pay, statements, and mobile banking, but please don't let that fool you. On the downside, they have a notorious reputation for fraud, stealing their own customers’ identities, and opening fake accounts to launder money in their names. Wells Fargo has a APY of 0.01% which is pitiful, however many people still use them because of convenience.
Silicon Valley Bank
Silicon Valley Bank is designed for startups. Their name may carry some extra credibility in some circles as well. It might make it easier to get inbound funds if you are raising money in the valley. Their startup business checking accounts come with three years of no maintenance fees and have unlimited transactions.
The Chase Total Business Checking is a wonderful choice for most new small businesses. Similar to Capital One they are best known for their high reward credit cards. They offer a variety of banking solutions, such as small business lending, and merchant services. Chase bank has an incredible mobile app too. They also have many branch locations and ATMs to make free cash deposits or debit card withdrawals. There is a strong travel program with many transfer partners and a cashback program. As a strong plus Chase has a APY of 0.8% which is very competitive. For business owners, they have an excellent selection to meet your needs.
Brex is a new banking alternative created by a young entrepreneur who was frustrated by not being able to open a bank account or small business credit card, despite being highly successful. They offer an only banking alternative with no transaction or ACH wire transfer fees. Also, their business credit card is ideally designed for startup businesses. They advertise getting an instant virtual card on approval, and 10x plus higher limits. Plus, they give you a 60 day grace period instead of the usual 30, so you can solve your cash flow problems easier.
HSBC is one of the largest international banks in the world. It is the largest in Europe. This is helpful if you plan to do a lot of traveling or expand into other countries. For some people, nothing beats going to a physical branch.
HSBC Fusion accounts are designed for small businesses. Just watch out for transaction fees after you hit your free limit, and their minimum balance requirements. Depending on your account, this may range from $5,000 to $75,000. HSBC is only a good choice for business travelers who value physical branches.
As of publishing this report, Aspiration is not advertising business checking accounts, but you can use their personal account as a business account if you are small. The company has many benefits that would make choosing them worth it. They are a small business banking startup born out of the desire to provide more ethical banking services in a world of big traditional banks. For example, they don’t invest your deposits in things like fossil fuels. Users have the option to round up their purchases to plant a tree for every transaction. Aspiration also offers a line of credit to new startup entrepreneurs of $5,000 or less, which includes mentoring.
Suntrust recently merged with BB&T bank to become Truist. While their mobile banking tools are lower quality for business accounts, their best perk is they offer a 10% cash back for business credit card purchases. Another major benefit to using Suntrust is having many options of fee free ATMs. Which helps, since Suntrust has only Southeastern physical branch locations. In recent years Suntrust has been pretty aggressive in lending, offering some of the largest lines of credit and lowest interest rates as well.
Citibank is another long-running traditional bank with many international locations. Citibank was named the best bank for mobile cash management by Global Finance Magazine. They are also recognized as the best bank for payments and collections. Citi has been defending these rewards for the second year running at the time of publishing this article. As a bonus, they are FDIC insured for up to $250,000. The only downsides are they charge ATM fees and they limit the monthly transactions you can process unless you upgrade to a more expensive plan.
Local Credit Unions
If your business is small and local, you won't find a better option than a nonprofit credit union. They usually have the highest APY in the industry of up to 1.5%. They have no monthly fees, transaction requirements, and no minimum daily balance requirements usually. One of the most solid perks is they offer the lowest interest rates for lines of credit. Their small business bank accounts can vary greatly though. I recommend you visit local physical branches or browse online for the best one in your area.
They are famous for their 0.8% APY on their Business Interest Checking account. Axos has a small $10 monthly maintenance fee and no service charges for the 50 first transactions. After that you will pay 50 cents per cash deposit or payment. This account has only a $100 opening deposit. The low fees are a high quality bonus too. If you can't open a Spark account with Capital One or don't have a good local credit union, then this is the next best option for high yield account lovers.
Bank of America
They are the second largest bank in America. The convenience of finding a physical branch or ATM is their biggest selling point. I wouldn't recommend Bank of America to new business owners that are tech savvy though because of their high maintenance fees and monthly balance requirements. If you are a well established business who needs a bank with a solid reputation, then Bank of America is a brilliant choice.
Azlo from BBVA Compass
Despite being an online bank, they were named the "Best Business Checking Account of 2020" for freelancers and entrepreneurs by Money Magazine. Their small business checking account includes no monthly minimums, mobile physical check deposits, and free transactions. They have a network of 55,000 ATMs that are fee free as well. They are proof that you don't need physical branches to still be convenient. For safety they are FDIC insured, so your money is protected. Finally, the best feature is their merchant services. The business accounts connect to Stripe, Square, or Paypal. If you are looking for a simple business checking account, then Azlo should be high on your list.
How to Choose the Best Bank for Your Small Business
As a small business owner, you are used to overcoming challenges.
Choosing a small business bank account will be easy if you choose from this list of best banks for small businesses.
Just make sure your choice is optimized for your personal business needs. Discover a bank that exceeds your minimum cash flow transactions, with a reasonable opening deposit as a new business and low monthly maintenance fees. Also understand the importance of your money keeping its value after inflation by getting a high APY account. Finally, if you need access to funding, choose a bank that has a high rewards business credit card or low interest SBA loan.
The right bank for your business is only a few steps away, you just have to pull the trigger.