Businesses have evolving banking needs at every stage of development, and financial institutions offer many types of services and support to new, growing, and mature businesses.

Learn how to set your business up for success by building a relationship with a financial institution that offers the banking services your company needs.

Why do small businesses need banking services?

Small businesses require all kinds of financial support to open, grow, and thrive. From loans to get your business started to building out a payroll system for employees, banking services are a necessity for many successful businesses.

Remember, products and services may vary depending on the financial institution you choose. It’s important to consider what your unique needs are before selecting an institution to bank with.

Securing funds to open or grow your business

  • Do I need additional funds to get started?
  • Do I need a loan to get a bigger space, cover cash flow fluctuations, acquire a company, or buy new equipment?

Accepting payments from customers

  • How will customers pay you for your business’ products or services?
  • What types of payments (credit, debit, cash, etc.) will you be able to accept?
  • Where will you go to cash checks?

Depositing money that your business has earned

  • How will I keep my earnings safe?
  • How will I access funds when I need to use them?
  • Will I save my earnings or invest them?

Getting cash and change

  • Do I need change and small bills for my business?
  • Is there a physical branch nearby that is easy to access?

Paying employees, service providers, and vendors

  • Are there employees, contractors, or freelancers on my payroll?
  • How will I pay vendors or other businesses that contribute products or services to my business?

How can developing a relationship with my financial institution help my business?

One aspect you may not have previously considered when selecting a financial institution is building a healthy relationship. However, your relationship with your financial institution can have a major impact on your business.

A long-term, positive relationship helps build trust and contributes to the success of your business.

  • They may provide useful guidance and or advice about your business.
  • They may advocate on your behalf to ensure you receive good service.
  • They may connect you with beneficial business contacts.
  • They may help you qualify for better interest rates.
  • They may be more responsive to your borrowing and cash needs.

What are some of the common accounts offered to small businesses?

Many small businesses begin a relationship with a financial institution by opening a checking or savings account to help manage cash on hand. Cash on hand refers to funds that are immediately available for use or that can be converted to cash within a couple of months.

Checking accounts

  • Small business checking account: Some financial institutions offer checking accounts specifically for small businesses, which typically offer extra services, fee-based transactions, and minimum balance requirements.
  • Commercial checking account: If your business deals with large transactions, a commercial checking account may be beneficial. Fees and credits (if offered) are often based on the number and total amount of transactions within a given period. These accounts often have a larger minimum balance requirement.

Savings accounts

  • Business savings accounts: A safer place to save your business funds is in a business savings account. Interest rates are typically lower than other savings options, but so are fees. Monthly withdrawals are restricted. 
  • Money market accounts (MMAs): These savings vehicles typically require higher balances but pay higher interest rates than savings accounts. Check writing features may be enabled on these accounts with some restrictions.
  • Certificates of deposit (CDs): A CD is a low-risk savings tool that typically offers higher interest rates than a savings account. Funds must be committed for a fixed period, and there may be penalties for withdrawing funds early.

What credit services are typically offered to support the growth of my small business?

Many companies depend on credit from financial institutions to open, support, and grow their business. The type of credit your business needs depends on factors like how quickly you need funds, how much you will need, and how long you require to pay the loan back.

  • Lines of credit: Lines of credit work much like a credit card with an approved maximum limit and interest charged only on the amount borrowed. Instead of using a card, funds are transferred to the borrower’s banking account to use when needed. Lines of credit may be used to even out cash flow or to purchase inventory.
  • Term loans: For larger loan amounts that require longer-term financing, businesses use a term loan, which is credit given in one lump sum that must be paid back over a specified period. Term loans can be specific to the asset purchased, such as equipment financing or commercial real-estate loans.

3 services to aid cash management

Managing the cash you earn and spend as a small business owner can feel like a major challenge, especially if you are just starting out. In addition to providing you with change or cash to keep on hand for customers, financial institutions may offer other services to help you manage your funds more efficiently and effectively.

  • Electronic money transfers: Electronic payments are convenient and often more secure, and they reduce paperwork. Direct deposits can be used to pay employees and vendors and to receive payments, especially for recurring services. Wire transfers are typically used for one-time payments.
  • Remote deposit capture: Remote deposit capture (RDC) is a method used to deposit checks remotely. Checks are scanned or photographed and then uploaded to your bank account for processing. This is useful for businesses that receive checks as payment and need an efficient method of deposit.
  • Merchant processing services: This service allows your customers to make payments via debit or credit card. Payments can be collected in a variety of different ways such as POS (point of sale) card reader terminals, online transaction processing, or gift cards.

How can banking services help me support my employees?

Some financial institutions offer services including payroll, retirement accounts, and insurance for you and/or your employees.

  • Payroll accounts: Payroll accounts help businesses control cash flow by keeping payroll and operating costs separate. Using a payroll account can allow you to deposit paychecks directly into employee accounts and manage employee benefits, deductions, and taxes.
  • Retirement accounts: Some financial institutions may help you set up IRA-based and 401(k) retirement savings accounts for you and/or your employees. This may both support your long-term financial goals and be perceived as a huge benefit to your employees.
  • Health Savings Accounts (HSAs): HSAs are a tool for people who are enrolled in high-deductible healthcare plans (HDHPs) and want a way to save money on medical expenses before, or even after, paying the high deductible. Some financial institutions may be able to help you offer these accounts to your employees as an added benefit.
  • WorkPerks: Show your employees that you care. This program is designed to bring banking to the workplace to save your employees time and money with exclusive banking benefits and incentives. For more details on the WorkPerk program, visit your local branch.

What should I look for with online and mobile banking services?

Most banks and credit unions offer some level of online banking services to their customers. Online services are accessed remotely, usually using a personal computer or laptop. For mobile services, you’ll need a cell phone or other mobile device. 

Online banking

Online banking refers to accessing your financial accounts or information via the Internet.

Services may include:

  • monitoring account activity
  • generating payments
  • depositing physical checks over the Internet
  • transferring funds among accounts

Mobile banking

Mobile banking is banking you access via your phone or other mobile devices. Many financial institutions offer applications (or apps) specifically targeted to small business owners. 

Services may include:

  • adding a digital wallet to make payments
  • taking and uploading of photographs of checks to make mobile deposits
  • communicating with financial institution representatives
  • creating custom alerts

Be sure to follow security best practices when using online and mobile banking services. Your banking information should only be accessed using a secure and trusted connection.

Next steps

  • Make a list: Create a list of banking services and features that are important to your business now and in the near future.
  • Shop around: Shop around for financial institutions with a track record of helping small businesses. Compare their services and features.
  • Meet with a representative: Meet with the representatives at your top-listed institutions to see if they’re a good fit.
  • Keep in touch: Once you’ve selected an institution, check in with your representative once a year to discuss your goals.

The information in this article was obtained from various sources not associated with Adirondack Bank. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. Adirondack Bank is not responsible for, and does not endorse or approve, either implicitly or explicitly, the information provided or the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. Adirondack Bank makes no guarantees of results from use of this information.

Article written by EVERFI