Choosing a banking product may not be the most exciting part of launching an online business, but it's an important decision that will impact growth.
Despite the importance of understanding how to manage your business finances, many business owners ignore these products or judge them on the same basis as personal finance products.
Taking the time to consider your business banking needs at the start can save you a ton of paperwork, unnecessary fees, and stress when switching banks later.
Below we discuss the key business bank accounts and products to consider after you incorporate your company.
6 types of business banking products
- Business Bank Account
- Credit and debit cards
- Online Business Banking
- Credit facility
- Payroll Services
- Cash Management Service
Corporate banking products are designed to help businesses maintain stable cash flow, organize their finances, and foster growth. These products are similar to consumer products, but they have different eligibility criteria, interest rates, and other terms.
1. Business Bank Account
Having a business bank account is important for keeping your personal finances separate from your business transactions. It's an essential habit for financial transparency. It may sound obvious, but many merchants don't choose a business bank account when they start their business.
Depending on your business structure, you may also be legally required to maintain separate bank accounts for business and personal transactions, which can make it easier to prepare financial statements and avoid paying taxes.
Most online merchants open accounts with retail banks, which are different from investment banks, which are typically larger and cater to institutional investors and capital markets companies.
What to look for in a business bank account
- Fee structure: Aim for an account with features like Shopify Balance, which has no fees to help keep expenses to a minimum.
- Banking Services: Look for value-added services like integrations with accounting software, great customer support, and easy data export options.
- Account Accessibility: Make sure your bank offers convenient online and mobile banking services. Accessibility makes a big difference in efficiently handling your daily financial affairs.
Common Business Bank Account Fees
- ATM fees: Banks charge these fees for cash withdrawals at ATMs, and they can range from less than $1 to around $3.
- Cash Deposit Fee: This fee is usually a percentage of the amount you deposit over the monthly limit. Fees can range from 1% to 5%.
- Monthly service fee: This is the amount your bank charges you each month to maintain an active account.
- Transaction fees: A transaction fee is a fee charged by the bank for each transaction above an agreed upon number (usually around 100 per month).
- Wire Transfer Fee: If you plan to allow your customers to pay you via wire transfer, your bank may charge you a wire transfer fee for these transactions, which is usually calculated as a percentage of the total amount transferred.
2. Credit and debit cards
Choosing a business credit card is an important consideration when opening a business bank account, as the two products are closely related. Accounts come with a variety of card types, each with customized bonuses and loyalty programs, fees and other terms.
Look for cards like Shopify Credit that offer volume rewards and have no annual fees.
What to look for when choosing business credit and debit cards
- Cost-effectiveness: Prefer cards with low transaction fees and no minimum balance requirements.
- Security Features: Make sure your card incorporates the latest security measures, such as EMV chip and PIN authentication, to protect your financial transactions.
- Overdraft options: Understand the terms of your overdraft protection and any associated fees.
- Tap to pay: Contactless payments make your life more convenient.
- Credit Requirements: Consider whether a line of credit or a credit card will best suit your business needs.
3. Online Business Banking
Online banking capabilities are essential for efficiently managing your business' finances. Regardless of the type of account you open, online banking can help you respond quickly to changes in your business environment.
What to Look for in Online Business Banking
- Real-time updates: Choose a platform that promptly updates your account balances and transactions to maintain accurate financial records.
- Comprehensive service: Look for features like online check deposit, advanced payment solutions, and a user-friendly interface that will enhance your banking experience.
- safety: Strong security protocols such as two-factor authentication and secure encryption are essential to protecting your financial data online.
- Digital First: Consider whether your bank is “online first” – do you prefer to do all your banking online or would you like the option to visit a branch?
4. Credit facilities
Lines of credit are used as a quick alternative to small business loans for cash flow or equipment financing, providing flexible financing solutions essential to continued business operations and growth.
What to look for in a business line of credit
- Flexibility: Choose a line of credit that offers flexible withdrawal options and repayment terms, such as a revolving line of credit.
- Interest level: Compare interest rates and look for competitive options that won't put a strain on your finances.
- terms of use: Understand the terms for drawing down your line of credit and the fees associated with it.
5. Payroll services
Efficient payroll services are essential for paying employees accurately and on time while handling records and complying with tax laws.
What to look for in a payroll service
- Automatic processing: Automation can help minimize errors and reduce the administrative burden. The service should handle everything from payroll calculations to salary distribution.
- Corporate Compliance: Payroll products need to handle payroll deductions and end-of-year forms to ensure businesses stay compliant with current tax laws.
- Detailed analysis: Accessing payroll reports allows you to effectively monitor your labor costs and budgets.
- support: Customer support and helpful learning materials, such as payroll guides, can help you navigate the complex issues that come with managing your payroll.
6. Cash Management Services
Effective cash management is crucial to the financial health of any business. It ensures sufficient cash flow to meet obligations and support strategic decision-making.
Points to note about cash management services
- Cash flow forecast: Discover products that can help you forecast future cash inflows and outflows and increase your ability to prepare for potential shortfalls. Understanding the basics of cash flow management can help protect your business from liquidity problems.
- Real-time analytics: Knowing your financial situation helps you make faster, more informed decisions. A service that provides in-depth analysis can help you better manage your business’ finances, ensuring every penny is well managed.
- Integration features: Look for a cash management service that can integrate with your existing accounting and ERP systems.
The best online business banking isn't offered by your bank
If you run an online business, traditional banks may not be able to meet all of your needs. Learn more about how Shopify's financial products provide customized, flexible solutions to help you grow your business without being locked into traditional contracts and fee structures.
*Shopify Capital loans must be repaid in full within 18 months, with two minimum payments within the first two six-month periods.
Business Bank Account FAQs
How do I raise capital for my e-commerce business?
Shopify Capital makes it easy to secure funding for your online store. Shopify Capital customizes your funding to match your sales, so you can repay it based on your store's performance.
Does Shopify require a business bank account?
While you don't need a business bank account to use Shopify, it's usually a good idea to open a business bank account when starting an online business.
Which business bank account is best for e-commerce businesses?
Choose a bank account that suits the dynamic nature of your e-commerce business. Prioritize features like no minimum balance, no monthly fees, and a strong digital banking platform.
