Which Type of Bank Account is Suitable for Business?
Which Type of Bank Account is Suitable for Business? The type of bank account you need depends on your type of business. However, some features are shared among different types of businesses. Before making your final choice, make sure to research the various options. Consider the features your business needs and scout out the best options. To determine the most suitable type of bank account for your business, consider your specific financial needs, such as the volume of transactions, cash flow, savings goals, and the nature of your industry. Consult with your bank to explore their offerings and find the best fit for your business.
If you would like to learn more information or about the pricing of bank accounts, you can do so here.
Which Type of Bank Account is Suitable?
The type of bank account suitable for your business depends on various factors, including the nature of your business, its size, and its financial needs. Here are some common types of business bank accounts, along with guidance on which one might be suitable for different business scenarios:
- Business Checking Account:
- Suitable For: Most small to medium-sized businesses.
- Why: Business checking accounts are versatile and can handle daily transactions, such as receiving payments, making payments, and managing day-to-day expenses.
- Business Savings Account:
- Suitable For: Businesses looking to earn interest on surplus funds.
- Why: Business savings accounts allow you to earn interest on your idle cash while keeping it accessible.
- Business Money Market Account:
- Suitable For: Businesses that want higher interest rates with some liquidity.
- Why: Money market accounts typically offer better interest rates than regular savings accounts, and they often provide limited check-writing capabilities.
- Business Certificate of Deposit (CD):
- Suitable For: Businesses with surplus funds they don’t need immediate access to.
- Why: CDs offer higher interest rates than savings or checking accounts but require you to lock in your money for a specific term. They’re good for longer-term savings goals.
- Business Merchant Services Account:
- Suitable For: Retail and e-commerce businesses.
- Why: Merchant services accounts are designed for credit card payment businesses.
- Business Line of Credit:
- Suitable For: Businesses in need of a revolving credit line.
- Why: A business line of credit provides flexibility for covering short-term financial needs, such as inventory purchases or managing cash flow.
- Business Loans and Credit Cards:
- Suitable For: Businesses seeking financing options.
- Why: Banks offer various business loans, including term loans, SBA loans, and credit cards.
- Online Business Bank Account:
- Suitable For: Businesses with a strong online presence or digital operations.
- Why: Online business accounts provide the convenience of managing your finances online, making them ideal for businesses primarily in the digital space.
- Business Overdraft Facility:
- Suitable For: Businesses that want to avoid overdraft fees.
- Why: An overdraft facility allows you to overdraw your account up to a specific limit without incurring hefty overdraft fees. It’s a valuable tool for managing cash flow.
- Business Foreign Currency Account:
- Suitable For: International businesses or those dealing with multiple currencies.
- Why: These accounts let you hold and manage foreign currencies, making conducting international transactions and managing exchange rate risks easier.
|Best Business Bank Accounts UK
Best overall business account
|Business Current Account
Runner up best business account
|Grow & Sclae
|Pay as You Go
|Business Extra Account
|Charity & Community
|Easy Access Business Account
|Best for savings
Interest-bearing Checking Accounts
Interest-bearing checking accounts are the way to go if you’re looking to increase profits and cut operating costs. Unlike savings accounts, these accounts have few restrictions on access and allow you to deposit unlimited amounts of money. They also don’t carry the federal savings account limit. An interest-bearing business checking account offers an annual percentage yield (APY).
This interest accrues the account’s balance over time, growing your balance. This type of account allows you to increase your savings and provides financial stability by allowing you to grow money that you’ve already earned. Business checking accounts can be opened at a variety of financial institutions. You can select a business checking account based on the types of transactions your business makes and your specific needs.
You can also select an account that features low fees. A business checking account should be able to meet your business needs from the start. Interest-bearing business checking accounts are suitable for businesses with high transaction limits. Choosing a bank that offers interest-bearing checking accounts is a smart move for any business owner. It’s a great way to separate personal finances from your business finances.
For example, if you own a restaurant, you might have a business checking account and a separate business savings account.
A business savings account can help a business prepare for emergencies. It can provide a cushion of cash for unexpected expenses or revenue loss. There are several types of business savings accounts available. One option is a cash management account, which combines checking, savings, and investment accounts into one account. These accounts offer high-interest rates on savings and lower fees than a traditional business checking account.
This account allows you to perform all your business banking activities, including paying bills and withdrawing cash from the account.
Because business savings accounts are separate from personal savings accounts, you may not need to open a new checking account if you already have one. Another benefit of a business savings account is that it rewards you for saving. A business can use the extra capital in its savings account to fund future expansion. In addition, business savings accounts offer to check account privileges.
This way, extra money in a business account will grow faster and earn more interest. In addition, a business savings account can also serve as a vehicle for obtaining small business loans. Business savings accounts with ATM access are another great benefit. Many banks offer accessible ATMs, but this is not always an option for business users. Therefore, businesses can use an online business savings account with ATM access.
There are also some business savings accounts with no monthly fees. These accounts often include:
- Online banking,
- Automated telephone banking, and
- Online bill pay.
Understanding the fees associated with a merchant account is vital before signing on the dotted line. Some merchant accounts require an initial set-up fee, while others may require a monthly statement fee or a gateway fee for remote transactions. Some even have annual account maintenance fees and customer service fees.
These fees can raise your cost per transaction, so you should consider them carefully when choosing a merchant account provider. Before applying for a merchant account, you must provide several supporting documents. Your business’s tax ID number, financial statements, average monthly transactions and credit card processing information are all essential documents to provide to a merchant account provider.
Additionally, some providers require additional documents, such as a business credit report. Merchant accounts offer many benefits to your business. For example, they make payments faster. This helps increase your sales. Many consumers prefer to pay with a credit card over cash. This convenience is an added benefit for small businesses. However, it can also create problems of its own.
Small businesses need to accept several types of payments to attract as many potential customers as possible. To find the best merchant account provider, you should understand the different types of payment processing. For example, third-party payment processors are a popular choice for small businesses, particularly those that do not yet have a long-standing credit card processing history. These vendors also offer pay-as-you-go billing and do not charge monthly fees. In addition, third-party payment processors do not accept high-risk businesses. Because of this, they are more expensive than merchant accounts.
Which Type of Bank Account is Suitable for Business? – Useful links about business invoice financing:
How Many Accounts Should a Small Business Have?
How Do I Choose a Bank Account for My Small Business?
How Can I Accept Payments Without a Bank Account?
Remember to Compare Your Business Costs is here to help your business every step of the way, from business advice or saving you time and money on your business purchases such as:
Ally Cox is a dedicated Copywriter and Blogger for CompareYourBusinessCosts.co.uk. In under two years, the platform achieved the esteemed accolade of ‘Website of the Year’. Since its award-winning debut, Ally has been instrumental in fostering organic growth for the website, expanding its offerings to encompass comparisons across a diverse range of over 20 products to help serve all your business needs.