Choosing the right bank for your business can often be an ongoing event. With the world of finance changing each day and new banks opening, there is more competition between the banks and therefore the opportunity for you to get a better deal. You will also find that, as your business grows, your banking needs will change.
As you start out in your new business, you may want to take some time comparing banks and bank accounts. As with most new businesses, you will have very little cash flow to start with so you would be looking for a bank account that has low fees. Unfortunately, this also means a low interest rate. As you are unlikely to be able to keep the minimum monthly balance required for high interest in your account for the first few months, the interest rate is initially of little importance.
Most importantly, you need to look at the types of fees the bank charges. These can include monthly fees and transactions fees. Some banks will charge different amounts for different types of transactions. For example, they can charge fees for ATM transactions, cheques written, deposits made etc. What you will ideally be looking for is an account that has a low monthly fee that covers most or all types of transactions.
Now that you have decided on a main bank account for your business, you may want to get a second account that gives you a high interest rate but still allows easy access to your money. This account will serve two purposes. Firstly, it gives you a way to put money aside for your tax liabilities. Secondly, it gives you an emergency cash fund. Ideally, at the end of the month when you have paid all your bills, you will transfer at least half the balance of your main account into your high interest account.
As we are progressively becoming a cashless society where our main methods of payment are EFT and credit card, your next account to research is a merchant account. Remember, your business has to pay the fees on these transactions so you will want to get the lowest fees possible. The fee structures for these accounts vary between a percentage of sales to an amount per transaction. You will need to estimate the possible amounts of transactions to see which calculation will suit you best. Some banks may also offer a combination of fee calculation types.
Lastly, you may want to look for a line of credit. This may be either a business credit card or an overdraft facility on your main account. The choice to make here, other than interest rates, is convenience. Which line of credit suits your business? In addition, you need to note that with an overdraft, your interest is charged immediately. With a credit card, you should be able to get interest free days.
So, this is what you have for your business:
A low fee, low interest main bank account, preferably with a chequebook and debit card.
A high interest savings account with easy access for tax and emergencies.
A merchant account for receiving payments by eftpos and credit card.
A line of credit.
Please note that you do not have to have all of these accounts with just one bank. Do your research and choose the accounts that offer the best deal for your business.
Choosing The Right Bank for Your Business - To learn more about this author, visit Glenda Lange's Website.
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