Hailey Johnson
Choosing a bank for your small business is a critical decision. A good bank for small businesses should offer affordable checking and savings accounts, credit cards for everyday purchases, and affordable loans for financing larger expenses. It should also provide ways to transact business across various platforms, such as mobile devices, desktop computers, and tablets. Some banks may offer higher returns on savings accounts, while others may provide business credit cards with rewards and no foreign transaction fees. Additionally, it is essential to consider the bank's reputation for customer service and its ability to build relationships with small business owners.
| Characteristics | Values |
|---|---|
| Bank's offerings | Credit cards, business loans, checking accounts, savings accounts, lines of credit, merchant services, payroll services, fraud monitoring services, etc. |
| Bank's reputation | High-quality customer support, understanding of small business needs, ability to build relationships, etc. |
| Interest rates and repayments | Competitive interest rates, affordable loans, interest on checking accounts, etc. |
| Accessibility | Mobile, desktop, tablet, physical branches, ATMs, etc. |
| Security | Protection from fraud, limited personal liability, purchase protection, etc. |
| Convenience | Easy to manage finances, fast and easy transactions, ability to connect external accounting and payroll data, etc. |
| Fees | Low fees, no monthly service fees, no minimum balance requirements, etc. |
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What You'll Learn
Business checking accounts
When it comes to business checking accounts, there are several options to consider. Firstly, it is generally recommended to open a dedicated business bank account instead of using a personal account for business purposes. This provides benefits such as separate record-keeping, easier identification of business expenses for tax deductions, financial tools, and protection of personal assets in case of legal action.
For small businesses, one popular option is to start with a local or regional credit union. Credit unions typically have lower fees, higher cash deposit limits, and more competitive lending rates compared to large national banks. They also often provide more personalised support. BlueVine, for example, is a financial technology company that offers high interest rates on checking accounts and does not charge monthly service fees. Another option is North One, a neobank that partners with The Bancorp Bank to provide FDIC-insured business banking services. North One offers unlimited sub-accounts, direct integration with popular online business platforms, and a standard free account with features like unlimited transactions.
If your business handles large volumes of cash, you may want to consider a bank with high cash deposit limits. Chase's Performance Business Checking, for instance, allows up to $20,000 in free cash deposits at tellers and ATMs, while their Platinum Business Checking offers an even higher limit of $25,000. Capital One's Enhanced Checking is also a good option for digital businesses with some cash revenue, as it charges no fees for digital transactions and unlimited cash deposits at ATMs.
For businesses that require wire transfers, Mercury and Brex offer accounts with no fees for sending or receiving transfers. American Express Business Checking is also worth considering due to its low fees, high APY, and unlimited free transactions. Additionally, Bank of America offers a range of business checking accounts with benefits such as access to Small Business Specialists and complimentary financial analysis.
When choosing a business checking account, it is important to consider factors such as fees, cash deposit limits, transaction limits, interest rates, and the availability of additional financial tools and support.
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Interest rates and repayments
Interest rates and repayment terms are key factors when choosing a bank for your small business. Generally, business bank loans offer low-interest rates and competitive repayment terms, but these often require strong credit and an established business.
When it comes to interest rates, American Express® Business Checking offers a competitive rate of 1.3% on balances up to $500,000, with no monthly, overdraft, or stop-payment fees. Grasshopper Bank's Innovator Checking offers an above-average rate by maintaining the right balance, with no extra work required. The APY tier breakdown is as follows: $0-$4,999.99 (0.25%), $5,000-$24,999.99 (0.35%), $25,000-$49,999.99 (0.45%), $50,000-$99,999.99 (0.55%), and $100,000+ (0.65%). Grasshopper Bank also offers 1% cashback for debit card purchases. Axos Bank provides a simple and inexpensive option with its Basic Business Checking account, with no monthly maintenance fee or balance requirements, and unlimited free transactions.
For repayment terms, Chase offers commercial real estate loans with fixed or variable rates starting at $50,000, with terms of up to 25 years. You can choose to repay the loan on a standard repayment schedule or make interest-only payments with a large payment at the end of the term. TD Bank business loans may have prepayment penalty fees if paid off early. Rapid Finance has no credit score requirement but requires other eligibility criteria, including repayment ability, time in business, and annual revenue. They do not charge late or prepayment penalty fees, but businesses must make at least $200,000 in annual revenue to qualify. National Funding offers high loan amounts with flexible credit requirements and customizable daily, weekly, or monthly repayment terms. Early repayment can qualify for payoff discounts.
Other banks to consider for small business banking include Bank of America, U.S. Bank, Capital One, Live Oak Bank, Regions Bank, KeyBank, Wells Fargo, and TAB.
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Customer service
When it comes to customer service, small businesses should look for banks that offer personalized support and a strong understanding of their business needs. Excellent customer service can save you a lot of headaches down the line.
Some banks, like American Express, offer 24/7 phone-based customer support, while others provide in-person support through branch access. It's worth noting that some banks, like Bluevine, are technology companies and may not have physical branch locations. If you value in-person support, ensure your chosen bank has branches you can access.
U.S. Bank, for example, offers both virtual and in-person meetings with business bankers, allowing you to choose the option that best suits your needs. They also provide a deep roster of industry experts, ensuring that you receive tailored advice and solutions for your specific industry.
Additionally, consider banks that offer dedicated support services. For instance, Bank of America provides access to a team of dedicated Small Business Specialists, ready to provide assistance and guidance whenever you need it.
It's also worth noting that some banks provide business credit cards with excellent customer support for virtual transactions. For instance, Rho has been praised for its customer support, nominal fees, and rewards rates.
Ultimately, the right bank for your small business will depend on your specific needs and preferences. While some businesses prioritize branch access, others may prioritize 24/7 customer support or a highly-rated app. It's important to evaluate these factors and choose a bank that aligns with your priorities.
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Business loans and credit cards
When it comes to business loans and credit cards, there are several options available depending on your needs. Here are some of the best banks for small business loans and credit cards:
Chase
Chase is a traditional bank that offers a wide range of small business solutions, including term loans, lines of credit, commercial real estate financing, SBA loans, checking accounts, credit cards, investing services, and payment solutions. They have scalable business checking options, with their entry-level Business Complete Banking being suitable for smaller businesses and their highest-tier product, Platinum Business Checking, being the best premium business bank account on the market. Chase offers a full suite of products, and pairing their loan products with business banking and credit cards can unlock extra perks like rewards points and rate discounts. Their business credit cards offer cashback bonuses and other perks. Chase's interest rates are based on your banking relationship, so it is beneficial to establish a relationship with the bank before applying for financing. They are also an SBA-preferred lender, which means faster funding turnaround times. Loan amounts range from $5,000 to $5 million, with repayment terms of up to seven years. Their business line of credit provides funding of $10,000 to $500,000 on a renewable five-year revolving term.
Bank of America
Bank of America offers a wide variety of business loan products, including lines of credit, cash-secured lines of credit, term loans, CRE loans, equipment loans, SBA loans, and healthcare practice loans. They also have several business credit cards to choose from. Their business checking products have waivable monthly fees, and they provide your Dun & Bradstreet business credit score for free. They also offer great ongoing rewards, including up to $300 in combined cashback rewards and statement credits. Their business loans start at $25,000, and they have a strong national presence with physical branches.
Wells Fargo
Wells Fargo offers unsecured and secured lines of credit up to $1,000,000, allowing you to withdraw what you need when you need it. They also offer business bank accounts, credit cards, and more. Interest is only applied to the amounts withdrawn, although some products charge an annual fee.
PNC Bank
PNC Bank offers a variety of small business products and services, including credit cards, merchant services, and lines of credit. They provide unsecured business loans of up to $100,000 with fixed interest rates, and payments are automatically deducted from your PNC Bank checking account monthly. They also have solutions for startups, although you typically need to operate for at least two years to qualify for a PNC Bank business loan.
BlueVine
BlueVine is a financial technology (fintech) platform that is FDIC-insured through a partnership with Coastal Community Bank. They offer a small business line of credit and a business checking account with some limitations. They also allow you to send payments to 32 countries in 15 currencies.
Additional Options
Other banks mentioned as good options for small business loans include SVB, Comerica, Western Alliance, Rho, and Capital One. Rho is specifically designed for startups and entrepreneurs, offering banking, cards, expense tracking, and 24/7 support with no monthly fees or balance minimums. Capital One provides flexible options for acquiring, improving, or refinancing commercial property, with loans of up to $5,000,000 and terms of up to 240 months.
Credit Card Alternatives
If you are looking for quick access to funds, business credit cards may be a good option. They often offer quick online applications and near-immediate access to funds. Merchant cash advances are another alternative, where you repay with a percentage of future debit or credit card sales, but factor fees and administrative fees can be expensive.
Eligibility Requirements
When applying for business loans, banks often have strict eligibility requirements. These can include minimum revenue requirements (typically $100,000 to $300,000), a personal credit score of at least 670, membership at the bank, a minimum time in business of six months to two years, and operating in an approved industry.
Rewards and Relationships
Many banks offer rewards programs and business credit card tie-ins. Additionally, having a business bank account with the lender may provide perks or be a requirement for borrowing.
Timing Considerations
Banks tend to have slower approval times than online lenders, so if you are in a rush for capital, you may want to explore alternative options.
Debt Management
It is important to carefully consider your debt burden before taking out a loan. As a rule of thumb, you should not exceed a 36% debt-to-revenue ratio for the total amount of loans you take out. For example, if your business generates $650,000 in revenue annually, you should not borrow more than $234,000 in total.
Interest Rates and Fees
Interest rates and fees can vary across lenders. Bank and credit union APRs typically range from 7% to 14%, while online lenders may offer rates from 10% to over 100%. Term loans may charge upfront origination fees, and credit lines may have ongoing draw fees. It is important to carefully review the terms and conditions of any loan or credit product before committing.
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Local vs. national banks
When it comes to choosing a bank for your small business, there are several factors to consider, and both local and national banks have their advantages and disadvantages.
Local banks often offer more personalised services, with community banks providing dedicated officers or a small team to work closely with their business customers. This can foster a strong relationship over many years, as staff turnover tends to be lower in local banks. Local banks are also more likely to have a good understanding of the local business landscape and the specific needs of small businesses in the area. However, one drawback of local banks is that they may be limited in terms of technology and security. For instance, some local banks may not facilitate foreign transactions without prior authorisation.
National banks, on the other hand, often have a wider range of resources and services available due to their larger size and broader reach. They may offer more advanced digital services, such as mobile and online banking, which can be crucial for small businesses that need to manage their finances on the go. National banks also tend to have a stronger presence of physical branches and ATMs, which can be beneficial for businesses that require regular in-person support and access to cash.
When it comes to fees and charges, both local and national banks can vary significantly. While some local banks may offer low or no fees, others may have hidden charges and unexpected costs. National banks are often known for their higher fees, but this can sometimes be offset by the convenience and accessibility of their services.
Ultimately, the decision between a local or national bank depends on the unique needs of the small business in question. Some key considerations include the level of personal service desired, the importance of technological capabilities and security, the need for physical branches and ATMs, and the overall cost of banking services. By carefully evaluating these factors, small business owners can make an informed choice that best supports their financial goals and operational requirements.
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Frequently asked questions
A business bank account helps you manage your everyday expenses and transactions, and it can also help you secure better deals for your business. A separate business credit score, which lenders use to assess the creditworthiness of a business, is established with a separate bank account. Better credit may provide access to more funding and purchasing power.
Chase's Business Complete Banking account is ideal for small businesses as it is designed for smaller transaction volumes and allows for large cash deposits. Capital One also offers a suite of business credit cards with the ability to earn unlimited rewards and access free employee cards. Additionally, Relay is a small-business banking and money management platform that allows businesses to create up to 20 checking accounts to categorize spending and issue debit cards.
PNC Bank’s Treasury Enterprise Plan is a good option for businesses with high deposit and transaction volumes. This account allows businesses to deposit up to $50,000 in cash fee-free each month and has one of the highest monthly transaction limits of any bank.
First Internet Bank's Commercial Premium Checking account is a good option for businesses with a higher number of transactions and more complex banking needs.
You should consider the monthly fees and your ability to avoid them, as well as other potential penalties such as excess transaction fees, overdraft fees, ATM fees, and deposit fees. Additionally, you may want to consider the customer experience and whether the bank offers online and mobile banking features.
