The need for banking services arose right after money took place in today’s society, many centuries ago. As a result, you can find different information about the original banks, bankers, and services that resemble today. But if you are interested in the history of modern banking, you can find out more at this link.
It quickly became clear that the money could not be evenly distributed. That triggered the development of a wide range of banking services. Several millennia have passed between the original storage of grain (something like today’s savings) and modern, digitized services and loans on click. Still, the essence remained the same – banks serve as intermediaries in numerous financial transactions.
Today, banking services are used not only by private individuals but also by corporate entities. It’s hard to imagine any company without a bank account, transactions to and from it, various loans, and other financial tools that should contribute to its business success. Thus, the needs of commercial entities triggered the development of the entire banking segment.
What Is Business Account?
Companies of all scopes need a business bank account, which they use to make financial transactions and deposit funds for their operations. Also, based on their financial standings and current situation, they might need loans or other financial incentives. They can also use corporate credit cards and advances for different purposes. Banks provide all these services, and they fall within the scope of business banking.
Commercial banks or their subsidiaries provide a wealth of services to companies of all sizes. These are usually financial and consulting services customized to the requirements of every client. Large and mid-sized corporations usually have in-house teams dealing with their finances. But owners of small companies and start-ups should also be aware of business banking importance.
Reasons to Have a Business Bank Account
For starters, you need a business account if you plan to accept credit or debit cards as a payment method in your company. Also, you need this account to split your corporate expenses from personal savings. That comes in handy in case of LLC or partnerships. It will bring less stress handling your finances.
What your company earns is what you use for smooth business operation and cash flow. A separate bank account provides a transparent audit to the IRS. You can spend these funds for investments or business expansion and have no worries about the legality of your transactions.
Even if you don’t intend to expand, having a business account will give you peace of mind. For example, without it, you risk your savings in the settlement if you get into a lawsuit and lose. But if you’ve separated your company’s and personal funds from the beginning, the business account will protect your money.
Another benefit of a business account is its increased credibility. Potential creditors and customers will feel more confident working with you if they know you have a legitimate bank account. Also, paying invoices through a separate check or credit card issued for your company will make you look more professional.
Importance of Banking for New Businesses
When you start a new business, you must prepare documentation to ensure the legal soundness of your company. There are many things to think about, but understanding the importance of business banking will make all the difference in your operations.
Setting up a bank account is essential for your company because it allows you to clearly define your expenses for tax purposes. Besides, many financial institutions offer some perks for new clients. These can be free or low-cost banking, branch-based advisers, and competitive interest rates on your company’s profits. So take your time and check all offers before choosing a financial partner that can meet your needs.
How to Choose a Bank
Starting a business is challenging and requires a lot of planning. Seeking advice from financial experts and relevant institutions can help alleviate some of the challenges. So choosing the right bank is like finding a strategic partner who enables you to explore your options and fund your goals.
The first step is to know your business needs. Each bank offers a different service package, so you should determine your needs and what you can get from a chosen financial entity. But it’s always a good idea to find a financial partner providing various services. These are checking accounts, accounting, advisory services, online banking, loans, etc.
On the following page, learn about the importance of good accounting for your business:
Corporate banks keep a dedicated team of specialists who can advise you on various topics, from opening and maintaining your account to funding growth. Other financial institutions have payroll specialists to help you with those concerns. And if your business depends on cash and wire transfers, you should look for a bank with experience in that industry.
Many financial institutions offer services geared toward specific industries. For example, if you’re an investor in real estate, you might want to choose a bank with experience in that niche. While working with financial experts for a particular industry isn’t necessary, it’s still a good idea if you’re interested in getting the best service.
Types of Services
Commercial banks specialize in providing financial products and services to corporate entities. These products range from checking and savings accounts to lines of credit, ACH wire transfers, financing, and cash management solutions.
Basic banking includes depositing money from customers and lending it to them. It also involves a variety of loans with different lending terms. Knowing your company’s capital needs and abilities lets you decide which loan is the best for you. The banks earn interest from these financial agreements.
Financial institutions also provide treasury management services. They assist companies in making their business more efficient by handling their cash flow. That involves managing payables and receivables, cash on hand, payrolls, etc. These services allow for better cash management, resulting in lower costs and, eventually, higher profits.
Another typical service offered by business banks is storage at safe deposit lockers. It helps companies protect valuable possessions and make their operations more efficient. Fraud insurance is also good to use. It protects your accounts from fraudulent activities. Unfortunately, these are common when too many people have access to your business funds.
The best banks offer a comprehensive range of services to meet the needs of company owners. However, they can’t provide all of these services. If you’re looking for a partner specializing in business banking services, contact several financial institutions and compare their rates and terms.
When You Need a Business Loan
Banks earn by putting their clients’ money to good use. They don’t have their own funds to use for giving loans; it’s money from other clients’ deposits and savings. For this concession, banks pay interest. On the other hand, these institutions earn on fees paid by other clients who get loans.
Corporate banks can use their clients’ deposits for loans and advances. They use it for approving long or short-term loans, with or without collateral, to other clients. Still, banks must refund this money any time clients want or at the agreed date (in case of term savings).
One of the many reasons to take a loan is to expand your business. You may not have the cash up front to hire new employees and buy inventory. A loan can provide the funding to do so. Also, you can use it for paying off or consolidating existing debts. You can also apply for a loan if you plan new projects.
Business vs. Personal Banking
Business banking refers to a particular aspect of banking that focuses on the needs of corporate clients. These banks approve loans and advise companies to help them grow. Services dedicated to corporate clients are payment and payroll processing, managing retirement and health savings accounts, etc. They also teach clients the importance of choosing the right business card or help them decide which loan meets their needs.
On the other hand, retail banks usually work with retail clients and individuals on personal banking. They provide financial services, such as checking, savings, loans, and credit cards. Their core activity is deposit-taking, which includes transaction and non-transaction deposits. These are a major source of fee income for retail banks.
Retail banks are large and generally do not have particular teams or bankers for each client. But in the case of corporate clients, there are dedicated bankers (or teams) who take care of their financial requirements.
To summarize, the same bank can work with individual and corporate clients. The services it provides for both are usually the same. Still, they differ in legal and regulatory terms. Also, corporate clients have higher financial requirements than any individual.
Starting a business can be a demanding task, so any help will do. A solid financial support will go a long way in making your banking experience smooth. So take your time to compare different services offered by different institutions. You should find a bank that caters to your specific needs.