Every business needs banking services so they can receive funds, pay bills, and finance large purchases. It may be tempting to just use your personal bank for your business needs. However, a business has much greater need to understand and carefully select its banking services. Your choices and your relationship with the bank will directly affect your bottom line, your employees, and your ability to grow. This article is intended to help point you in the right direction if you are starting a business or looking for better financial services.

Tips for Choosing a Bank for Your Business

Financial institutions differ greatly in the services and products they offer to businesses, especially when it comes to startups and small companies. It is definitely worth taking time to talk to different banks and learn about their offerings.

1. Gather Business Documents

Before talking to banks, you should check your credit score and gather details on your current financial situation. You should be prepared to discuss your current and projected income, expenses, and plans. You also need to have an idea of what you need in the way of banking services and what you may need in the future.

2. Get Personal

Because you may need to visit the bank frequently, it is best to start by looking for one that is close to your business location. If you are happy with the bank that handles your personal accounts, you may want to begin there. You should go to each bank personally,if possible, rather than just visiting their website or talking to someone on the telephone. This will give you a much better feel for the kind of service you are likely to receive.

3. Review Customer Ratings

You can get some insight about a bank by looking at customer comments and ratings online. But remember that online reviews can be fake.  Consider the general tone of the comments more than what is said in each individual review.

4. Do Your Homework

Check out several financial institutions and make notes of the pros and cons you discover. Be sure to learn exactly what fees and requirements may be imposed. For instance, some banks have minimum balance requirements and checking account fees, while others do not. Some charge fees if you don’t write enough checks or use your credit card frequently enough. Don’t settle for a bank that doesn’t offer all the services you require, or that charges too much for them.

If you have or plan to apply for an SBA loan, make sure your bank is an SBA-approved lender.

5. Be Real

Be honest about your situation and needs. Ask the tough questions such as how likely it is for someone in your position to obtain a loan. It’s far better to find out now than to be disappointed in a time of need!

As you investigate, consider your gut feeling. If you have a sense of unease, there is probably a good reason for it. On the other hand, a positive feeling may indicate that you’ve found the right fit.

What Accounts Do You Need?

You will certainly need a business checking account. Don’t forget to order checks and a check register, even if you expect to do all your transactions with a card or online. Most businesses find themselves needing physical checks for situations such as signing leases. One tip is to explore options online for purchasing physical checks, as they can sometimes cost less than what the bank may charge.

You should also apply for a business credit or debit card up front, even if you don’t think you need it. There can be many benefits such as building your business credit rating and having emergency cash available. Try to get a card that has no annual fee or minimum usage requirement. Take into account any card benefits that may enhance your financial strategy, such as cash back, credit card revenue sharing programs, low interest rates, frequent flier miles, etc.

Nearly all financial institutions offer online banking services. Be sure to register right away. Sometimes it takes a while for the bank to issue approvals and set things up on their end.

A business savings account is a typically a wise idea, especially if you can get one that requires no minimum balance or fees. A business savings account is a place to store excess capital and to grow these funds by accumulating interest. Be sure to find out about any limitations on the number and size of your withdrawals or transfers. These can lead to unpleasant surprises when you need quick access to your funds.

If your business is diversified, you may find it helpful or necessary to set up separate accounts for different aspects of the enterprise. Your financial advisor can help you determine these needs as well as how to handle the transfer of funds between accounts.

Keep Funds Separate

If you are a freelancer and intend to stay that way, you might be able to get away with using your personal bank account for business income. But if your intent is to grow your business, it is to your advantage to keep your personal and business finances separate. As a sole proprietor you will have a much easier time determining your profitability and paying taxes. This is even more important for a partnership where multiple individuals are involved.

If you incorporate your business, you are legally required to separate your business and personal finances, because your business is considered a separate legal entity. There can be big advantages to this for some businesses. Paramount among these is the ability to protect your personal assets should your business suffers losses or lawsuits. It can also protect you from personal liability for business debts.

It is best to avoid using personal checks or personal credit cards to pay business expenses.  Although these expenses can be submitted for reimbursement, it means more paperwork and potential for error. More importantly, avoid using business funds to pay for personal expenses, even if you plan to reimburse the business. If you’re self-employed, pay yourself a salary so that you have good records, and your funds remain separate.

Why It is Important

Keeping your funds separate lets you build a business credit rating that is distinct from your personal credit rating. This can be of huge importance when you need a loan.

Keep receipts for personal and business expenses separate. This can save you a lot of headaches at tax time, and even more so if you are ever subjected to an audit. Many business expenses are tax-deductible, while personal expenses are not. Keeping your receipts separate can be especially helpful if you have a home office.

Banking Rewards

Some banks offer a cash bonus or other incentive when you open a new business account. Of greater value are long-term benefits such as low interest rates, cash back, and ongoing services that support your financial strategy.  Be sure to ask your banker about short-term incentives and long-term benefits before you open an account. Sometimes they will not tell you unless you ask.

Some banks offer free or discounted insurance plans, tax advice, or payroll assistance to their business customers. Watch for these and take advantage of those that apply to you.

Another thing to watch for is special promotions. Many banks and credit unions offer extra-low interest rate lock-ins to new borrowers during slow periods. Be sure to read the fine print when pursuing one of these special offers, and make sure they mesh with your long-term financial strategy!

Obtaining a Business Loan

Banks and other lenders offer a variety of short- and long-term loans for various business needs. Working capital needs, equipment purchases, real estate acquisition, and business expansion are some common justifications for business loans. In addition to traditional bank loans, businesses may apply for lines of credit, invoice/accounts receivable financing, merchant cash advances, or SBA guaranteed loans. A more detailed description of the kinds of loans available and typical requirements can be found here.

Here is a list of six ways you should prepare before applying for a business loan.

  1. Have a rock-solid business case and financial forecast.Be prepared to discuss in detail exactly how the money will be used and why. Your financial forecastshould be credible and well supported by data. The bank will need assurance that your business will have the means to make loan payments.
  2. Know exactly how much you need to borrow.A ballpark figure will not do. A solid financial forecast should provide this information.
  3. Maintain a great credit score and payment track record.Banks don’t loan to people they don’t trust.
  4. Determine what you could offer as collateralto cover the loan in case of a default.
  5. Be prepared to show that your business is well-managedand has good cash flow. Or if you’re a startup, be able to offer proof that you are well positioned to make money.
  6. Organize your documentation.Prepare a folder containing relevant documents in a presentable fashion. Include at least the following:
    • financial statements
    • credit report
    • tax returns
    • business plan
    • revenue forecast
    • legal documentation such as business registration papers, articles of incorporation, licenses, etc.

If your company is new, small, or a sole proprietorship you may need your personal documents as well as those for your business.

Develop a Personal Relationship with Your Banker

As your business grows and goes through cycles, you will need to build understanding and trust with your bank. You need to build a relationship with a specific person at the bank. You should meet with that person often to discuss your business situation, financial needs, and plans for the future.

Because your business is unique, your banker needs to fully understand your business and your desires. The time you spend in discussions with your banker will pay big dividends in the long run. A banker who has experience in your industry, has confidence in you, and is excited to see your business succeed, is a priceless asset.

Over time a trusted banker can become almost like a business partner. Your banker can suggest products and services to help you better achieve your financial plan. Together you can find the best ways to keep your business moving forward toward the success you desire.


Choosing the right bank, the right financial products, and the right banker is critical for your business profitability. It’s well worth taking the time to make those decisions correctly. If your current banking situation is less than ideal, perhaps it’s time to make a change.  Should you need assistance in finding the best situation for your business, Preferred CFO will be more than happy to help.

About the Author

Loren Anderson CFO Preferred CFO Utah

Loren Anderson


Loren is a financial expert with 15 years in the industry. He is experienced in working in high-growth environments, optimizing financial strategies to help companies achieve their financial goals.

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