Banking is a vital piece of your business’s success. Without a banking partner you can trust, it’s easy to run into issues that could ultimately impact the success of your operation. Choosing the right financial partner is a must as a business owner.
There are a few key things to consider before you choose a banking partner. Managing your finances is an important piece to running a business smoothly, so it goes without saying that you should some time to research and find one to fit your needs.
Why Your Business Needs a Banking Partner
The main reasons why it’s important to have a banking partner include the following:
- Financial management
- Banking accessibility
- Account/service options
- Support, advice, and counsel
It’s sometimes asked, “Why do I need to set up a separate account for my business?” Often, especially when businesses start, it can be tempting to “keep things simple” by utilizing a single checking account. The thought is that keeping money all in one place will make it easier to track and manage. Unfortunately, this often isn’t the case.
Besides the fact that many banking institutions have rules against using a single account for both personal and business use, there are a few additional reasons why keeping separate accounts is a better strategy:
- They help you limit liability
- They make things easier when it comes to doing taxes
- They prove to lenders and investors you know what you’re doing
There are certain business structures that people choose, specifically to limit their liability should their business fail or come under threat. Limited Liability Companies (LLCs) are a great example.
However, if an individual chooses to bank for their business out of a personal account, the benefits of an LLC can be forfeited. If your business were to suffer legal woes for any reason, you may be opening your personal wealth up to the unnecessary threat of liability, one from which you should have been protected from the get-go. Don’t let this small, but important detail set you up for financial failure.
Taxes Will Be Easier
Think about filing time and the complications you already face as an individual – trying to keep things straight and stay on top of your income/liability items. Now, imagine trying to sort through line items in your checking account when all of your business purchases are mixed in. It would be a nightmare.
Opening a separate account with a trusted banking partner will allow you to keep things much more organized and save you time and headaches.
Prove Your Business to Lenders and Investors
Not only does a separate account limit liability and help keep you organized, but it also shows your business partners you’re serious and know what you’re doing.
There are times when your business will have to share its financial information with outside parties. These parties need to be able to see that you take your business financials seriously and know how to handle your money. They won’t trust you to manage their money if they think you can’t manage yours. Don’t allow your personal finances and business finances to intermingle.
Besides helping to keep your finances on track, a good banking partner will give you options that help you bank on your terms. You may need a banking partner that can help you in the most convenient way possible – whether it’s banking on the go or in person.
In-person banking might not be necessary for you, or you may want the option should you need more assistance and support. For instance, it may be better if you deal in cash regularly (online-only banks often don’t have great ways to handle cash). However, online banking might be cheaper and provide a greater sense of mobility.
Choose a partner that provides the accessibility you need for your business.
There are going to be things you need to think about ahead of time before you choose your banking partner – things like account types, potential fees, or availability of additional banking products.
Consider the type of account you want for your business. Some banks have only a couple of types of accounts. Others have many. Some will provide interest. Others, may offer very little or none at all.
What about fees? Will you be charged deposit fees, transaction fees, ATM fees, or fees for monthly account maintenance?
Does your business need additional services, like a business credit card or a line of credit? Do you want business insurance options through your banking partner or any type of liability coverage? What about benefits and banking options for your employees? HR support or payroll services?
When you consider who to bank with, think about what your business needs are going to be before you make a decision.
Support, Advice, and Counsel
A couple of things that are often overlooked when choosing a banking partner are the availability of representatives and the level of customer service. After thinking about the banking products and services you need, it’s important to consider what type of care and attention you’ll receive once you open an account.
If you’re unfamiliar with banking products and types of accounts, you may want to choose a partner who will take the time to listen and walk you through the many different options and give you advice based on the unique needs of your business.
If you choose a brick-and-mortar banking partner, take this documentation with you when you go to open the account. If you decide to go with an online bank, this process might look slightly different. In this case, you will likely have to email or upload your documentation.
What Are the Business Benefits of Credit Unions vs. Banks?
A bank is a state or federally-licensed financial institution which is allowed to hold and lend money. While this may sound lofty, it’s simpler to recognize that they are a business just like any other. Banks offer products and services and seek to make a profit.
Credit unions are different from banks because they are not for profit. Credit unions hold and lend money similarly to banks. However, they are cooperative, member-owned institutions. While banks may seek to make a profit for their shareholders, credit unions actually pay dividends back to their members.
Because of their differing financial objectives, credit unions often provide a unique set of benefits that banks do not. This might include:
- Better rates on accounts
- Small business loans
- Community orientation
- Personalized service
Better Rates on Accounts
Since credit unions are not for profit and focus on providing the greatest value to their members, it’s common for them to have better rates than banks. Not having to worry about paying shareholders provides this flexibility and allows them to pass on savings. Whether you’re looking for lower fees or you’re looking for higher interest rates on your business accounts, credit unions are often the best choice.
Small Business Loans
While banks offer loans to small businesses, it can sometimes be the case that a smaller business gets overlooked. Due to their larger scope and focus, banks may not offer small-scale loans to businesses that need them. This is another area where it would be important for you to do your due diligence and make sure your banking partner will be able to provide what you need for your business.
Credit unions are member-focused. This also means they are naturally community-focused. Since credit unions are formed with the benefit of their members in mind, this leads them to have an interest in the community around them. In fact, almost 50% of credit unions have missions specifically to serve low-income communities. They do this through affordable financial services, accessible banking products, and lower rates.
When you look at surveys on customer satisfaction, credit unions rank extremely high and tend to outperform banks. A study done by Consumer Reports showed a 96% “highly satisfied” rating from members regarding their credit unions. They don’t just talk about serving their members – they truly live up to their promise.
The fact that credit unions are cooperative, member-owned institutions allows them to align their stated mission with the financial benefit of their customers.
Lafayette Federal is Your Business Banking Partner
With almost 90 years serving members worldwide, Lafayette Federal Credit Union is a proven and trusted banking partner. We have the experience, resources, and tools to help you and your business thrive.
Lafayette Federal provides account options that serve small to medium-sized businesses. Depending on the number of banking transactions your business needs, you can choose a checking account that will support you. If your business wants to save, we also supply a range of savings accounts that provide dividends or interest rates of different levels.
If you anticipate that your business will require loans or business credit of any kind, we’ve got you covered. We can offer you a line of credit or even help with a commercial real estate loan. Our Business Mastercard can also help support you with limits up to $50,000.
As a member of Lafayette Federal Credit Union, your business can take advantage of employee banking services. You can offer no-fee checking accounts, free online bill pay, and many other products to help your employees maintain their financial health.
If you need a banking partner for your business, give us a call or come into one of our multiple branch locations. Look online at the services we can provide for your business. Whether you need robust solutions for you and your management team or the employees you take care of, we can get your business on the right financial track.