What is Business Banking?

Business banking, also known as business banking, refers to the set of services and activities that financial institutions provide to meet the unique needs of business customers. Examples of business banking products include business checking accounts, savings accounts, loans, and credit cards. Commercial banking is best for sole proprietorships, partnerships, limited liability companies (LLCs), and corporations.

How commercial banking works

In commercial banking, business owners and corporate representatives work with a bank for their business-related financial transactions, where the banks provide them with financial and advisory services that meet their needs. Banks or financial institutions typically create separate departments or divisions solely to provide business products and deal with business customers.

When you open a business bank account, you will be required to submit documentation related to your business, such as business licenses, articles of incorporation, or articles of organization.

Business Banking vs Personal Banking

Who Should Consider Commercial Banking

Commercial banking is a complete necessity for any size of company and type of entity. Here are some benefits offered by commercial banking:

  • Leaves you Separate business and personal finances: To protect owners from legal liability, the law requires corporations and LLCs to keep their business and personal finances separate. However, even if you are not legally required to separate your business and personal finances, not doing so carries many risks. For example, if you use your personal bank account for business expenses, it will be harder to get an idea of ​​how much money your business is making.
  • Facilitates tax preparation: Opening a separate business bank account makes it easy to track business income and expenses. This is useful when you need to file business taxes.
  • helps you build commercial credit: Creditors use your company’s banking history as a reference when deciding whether to give you a loan. By opening a business bank account, you can establish good business relationships, build business credit, and gain access to better rates on products and loans.
  • Gives you access to trading tools: Most commercial banks also offer solutions to suit your business needs, such as accounting and billing software integrations, merchant services, payroll processing services, and business advisory services.
  • Provides access to company-specific discounts and rewards: Many commercial banks offer cost-saving promotions such as cash back, redeemable rewards points, airline miles, and discounts on commercial products and software.
  • Offer your business a more professional image: You can make your business appear more legitimate by using business checks for transactions with vendors, vendors, or customers.

Types of business banking products

Commercial banks serve a wide variety of customers, from startups to small and medium-sized businesses (SMEs) to large corporations with different needs. Business banking products and services are specifically designed to meet the diverse needs of these businesses.

Most commercial banks offer the following commercial banking products.

business checking accounts

A business checking account is a type of bank account that allows you to store and move your working capital. Through it, you can make deposits and withdrawals, write checks, process automated clearing house (ACH) payments, and make purchases and cash withdrawals using a debit or ATM card for your business transactions.

Having a business checking account is important, especially if your business needs to make regular payments to suppliers or vendors. These accounts usually have costs associated with them, although you can find some free business checking accounts from digital banks.

Savings accounts for companies

Unlike business checking accounts, which are designed to hold working capital, business savings accounts allow you to store excess funds for future use and allow you to earn a small amount of interest, making it a good place to start. park your extra money. In most cases, business savings accounts allow you to easily access your funds whenever you need them. However, most banks limit free withdrawals to six per statement cycle.

Business credit cards

A business credit card is a credit card intended for business use. By using one, you can build business credit and improve creditworthiness, giving your business access to better financing opportunities in the future. Having one can also help you keep your business and personal expenses separate.

Business Loans and Loans

Business loans and loans are designed to provide you with access to financing and working capital for your unique business needs. Business loans differ from personal loans in that they are specifically intended for business purposes. Common business loan products include SBA loans, business lines of credit, merchant cash advances, business mortgages, and equipment financing.

FDIC insurance

Most business bank accounts provide FDIC insurance up to $250,000. FDIC insurance promises to compensate your company’s bank deposits, should your bank or financial institution fail. This coverage is separate from your personal bank account coverage, as long as your business is organized separately under state law.

Types of Commercial Banking Institutions

You’ll find commercial banking products at financial institutions like traditional banks, online-only banks, and credit unions. Understanding the different types of financial institutions will help you choose a bank for your business.

Traditional Banks

Traditional banks refer to for-profit banking institutions with physical branches. They tend to offer a full range of banking services, including checking products, savings products, loan products, and credit cards.

Banks only online

Unlike traditional banks, online banks operate exclusively online and do not offer physical branches. However, because online-only banks don’t need to pay rent and utilities, they can usually offer banking products with lower fees and higher rates than their traditional counterparts.

credit unions

Credit unions are non-profit organizations owned by their members. They focus on creating specialized services that meet the needs of their member base. As a result, credit unions often offer lower fees and higher rates. To join a credit union, you generally must meet specific criteria, such as living in a specific place, working for a particular employer, or having family members who are already members.

Pros and cons of commercial banking

Bottom line

Business banking is made up of exclusive banking products and services for business customers. Opening a business bank account is a complete necessity when running a business because it allows you to separate business and personal finances. Commercial banking products and services are specifically tailored to meet the needs of businesses of all sizes.

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