With so much information out there about small business banking, understanding the ins and outs of your business finances can be a headache at first. Adopting good banking practices in the first stages of your business can mean the difference between success and ending up wrapped in debt.
Business banking differs slightly from personal banking, so it is important you have a strong understanding of your financing options and how to keep track of your spending and investments.
Opening an Account
When first setting out to open your business banking account, it’s important that you find a bank that is tailored to your business’s needs.
- Though many big banks are now offering small business loans and financing options, smaller banks are often more likely to reward loans to startup businesses.
- Business bank accounts often have specialized services included specifically for business owners.
- Having a personal relationship with your banker can help you get a better understanding of your finances throughout your business’s growth. Keeping lines of communication open will allow them to answer your questions completely and give you better financial advice.
- When opening a business banking account, be sure to keep your personal accounts completely separate. Mixing your banking can lead to confused bank statements and tax forms, and can also put your personal credit at risk in the long run.
Funding Options Available
After opening your business bank account, you might be looking to gain funding for your startup by means of a small business loan or opening a business line of credit. Consider the many options available to you.
- Business loans are available in two forms – secured and unsecured. Secured loans are based around collateral to secure repayment using personal possessions or property. Unsecured loans do not, and are generally used for smaller amounts, but can be either long or short term.
- SBA loans are loans that abide by the Small Business Association set of guidelines. They are government-backed loans that are often easier to qualify for and are over longer terms. There are a few different types of loans offered, which you can learn about on their website.
- Business lines of credit are also an option to fund your small business with. Business credit shouldn’t be used for large purchases and should be paid off regularly in order to protect your business credit score.
Getting Approved for a Loan
When applying for a loan or type of funding for your business, you will need to get approval from a lender at your bank; there are a few important aspects to have in place to get the loan.
- You will need to provide your lender with an in-depth business plan. It should include detailed descriptions of what you intend to spend the money on, and a realistic projection of your businesses revenue.
- You will also need to provide a personal credit report as well as other previous business credit you have acquired. You also may need to provide references and other information.
Keeping Track of Your Finances
Once your business account is set up and you begin to generate revenue, you should remember to keep track of your finances and monitor your spending appropriately.
- Mobile banking allows you to access your bank information from your mobile device, making it easy for you to make wise spending decisions while away from the office.,
- Saving for future and reinvesting into your business is the only way to turn it into a sustainable source of income. Creating a reserve fund for future through times could be the key to your business’s success.
Banking for your small business should be a relatively easy process. As long as you have a clear understanding of the type of funding your business will need and how you intend to grow in the future, keeping track of business spending shouldn’t be overwhelming. It is important to be realistic when projecting your expected costs and monitoring your financial progress.