Being a small business owner requires understanding all sides of your company’s operations, including finances. By utilizing the right business banking products and services, you can ensure your business remains productive and profitable. This May is National Small Business Month. In this blog, we will discuss small business banking and how establishing a business savings account can open the door to greater business banking opportunities.
Small Business Statistics
The small business landscape today includes various industries and spans the entire world. In California, there were 4.2 million small businesses that employed roughly 47% of California’s workers, according to the 2024 Small Business Profile report released by the U.S. Small Business Administration (SBA). Across the U.S., there were a total of 33.3 million small businesses employing more than 61.6 million people in 2023.
Small business owners have shown themselves to be very resilient. Despite the COVID-19 pandemic, since 2021 there has been a significant increase in business applications, up to 16 million, leading to 2.8 million new businesses.
Small businesses are also great drivers for the American economy, especially in underserved communities. In 2023, the SBA’s Surety Bond Guarantee Program bonded $7.3 billion in government contracts for small businesses. Out of those, 62% of the contracts went to underserved communities, according to the SBA’s Office of Surety Guarantees.
Keeping Your Business Finance Separate From Personal Finances
It is good practice to keep your business and personal finances separate, especially for tax purposes. Opening a business account at a financial institution with a business banking department is a practical start. For example, when you begin accepting payments from customers, having a business account will keep your company’s finances legally compliant and your funds safe in a federally insured deposit account. Plus, having checks drawn from and deposited into a business account rather than in your name will make your company look more professional.
Many financial institutions offer business banking products, including savings, checking and credit cards. Others, such as Travis Credit Union, also offer merchant services to help keep your business running smoothly. With a business savings account, you can set aside dedicated funds to ensure you can meet payroll each month and pay taxes each year. By establishing a business account, you are also making it easier for you to potentially borrow money from your financial institution so you can grow your company.
Search for the Best Business Account Products
Searching for the right business banking partner starts with your local credit union or community bank. Most financial institutions offer business accounts that include savings, checking and lines of credit. The key is to find those that offer free business accounts and services to save you money. Keep in mind these products will vary by bank and may have additional expenses associated with them.
Remember to select the account that offers little or no fees and has good features, such as these:
- Introductory offers, such as credit card purchase rewards and/or cash back.
- Interest-bearing accounts for savings and checking that earn high APYs.
- Lower interest rates for loans and lines of credit, such as for a credit card or revolving line of credit.
- Low transaction fees per transaction made through the business account, like depositing or writing checks and depositing cash.
- Early closure fees for closing out accounts or paying off loans.
- No or minimum account balance fees if an account balance falls below a certain dollar amount.
- No maintenance fees for maintaining accounts at the financial institution.
What You Need To Open a Business Account
Opening a business account requires your business name, employer identification number (EIN) or Social Security number, and a declaration of whether your business is under sole proprietorship. Additionally, you will need your business formation documents, ownership agreements and a business license from your state. Depending on the financial institution, more documentation may be needed so reach out to ensure you have everything you need to open an account.
Importance of Saving for Unplanned Business Expenses
Businesses, like people, may experience unexpected or unplanned expenses that you, as the owner, will have to address. Establishing a business savings account and regularly setting aside earnings is a smart way to prepare for those unexpected expenses. Shop around for an account with a high annual percentage yield (APY) so that you can earn more for your money.
How TCU Can Help
Travis Credit Union offers business savings accounts and business services to help your company thrive. We offer business loans and lines of credit, as well as Small Business Administration loans. TCU’s top-rated mobile app makes it easy to bank on the go. Visit our Business Banking page to see what TCU can do for your business.