One of the pieces of the Fundability
puzzle is when you open a business bank account. Many vendors will require it for credit approval.
Open a Business Bank Account for More than Fundability
The IRS wants companies to open a business bank account because it helps keep personal assets and business deposits separate. This is useful for tax purposes.
Pay business loans and interest with a business bank account, too.
Businesses that have secured their own accounts are more professional. This can only help you impress customers and prospects.
#3. Improve Your Business Bank Credit Score
Did you know that banks have their own ratings of their customers? A company is being judged on how often it adds a deposit and on the services they are using from a member FDIC or other bank. You will never actually see a bank credit score for your business account.
What you will notice, though, is the ease (or difficulty) accompanying getting a business loan.
Business Checking and Savings Account and Getting Cash
Responsible management of a checking account or savings account will make it easier to access funds from a bank. Banks also judge your business on deposit and withdrawal behavior and the accounts a small business will use.
Bank Products Help You to Improve Your Score
A bank for business offers products like ways to invest your funds to withdraw cash at a later date. You will have better credit if you access and use more services from the bank.
Some More Ways to Increase Bank Credit Scores
Small businesses can also help their bank credit by getting short term financing or secured credit cards through banks.
In short, the more services companies use, the better they handle their cash, and the more reliable funds coming in, the better a business bank credit score will be.
#2. Establish Business Credit
Credit for a business is an asset! Business credit can provide benefits to a business now, but it’s also a smart way to invest in the future of a business. Even startups can reap benefits.
Opening a business bank account is vital for building small business credit. In fact, many starter vendors for business credit will not provide true business credit cards unless you have a bank account!
Business Credit Cards Need a Business Bank Account
Lenders or any other credit issuer will want to see there is a place for any funding to go. They feel more secure if businesses have their own bank account as a place to put income, cash from a fund, or any other form of financing.
Banks will feel a lot less secure if there is no business bank account and an entrepreneur—or even a corporation—has no place to put funds beyond a personal savings account or the like.
Make Business Credit Card Payments
You’ve got cash in a business bank account, so why not use it as one of your resources to cover payments for the purchase of goods and services via your credit cards?
This is so even if you pay everything online and never actually use a check.
Fundability
Fundability is not an end unto itself. But having an account with a business bank is a vital part of it. Much like getting all your licenses or a separate phone number, it signals that you are serious. That is, this is a business, and not a hobby.
#1. The IRS Prefers if You have a Separate Business Checking Account from Your Personal Accounts
The Internal Revenue Service does not want you commingling funds. They don’t want to see business credit payments or loan interest or the like coming out of personal savings.
Having secured a separate account for everything from business credit card payments to paying for merchant services to interest on business loans will help to assure the IRS.
In fact, it can even help the IRS distinguish a business bankruptcy from your own finances.
A separate account will also make the preparation of individual and business tax returns a lot easier. This will be the case whether you prepare your own taxes, have an employee who can handle them, or farm the task out to a tax professional.
Bonus Reason: It is Far More Professional
How will you pay back clients if you need to offer a refund? Will any payment to a customer be with the professional checks from your business account? Or an online payment from your corporate account?
How about covering business purchases? What about paying salary to your employees?
To Assure Better Dealings with Your Business Customers
How about when you need to pay for merchant services? Or maybe send a check or an electronic payment to an investor (to, say, cover their business travel to meet with you)?
What about paying the security deposit on a building or office your corporation is leasing?
Assuring Customers and Prospects
How much security will a customer experience if you pay them with your own check or credit card? Will employees think there is any security in getting paid through your own accounts?
Will other businesses you do business with see any benefits to you paying them with a consumer credit card or via an online consumer account? Do you think the providers of merchant services will give more or less credit to your business if you do not have a business account from any banks?
Assuring You, Too
Do you want more confidence in your company? Accounts from banks for small business are a way to “plant your flag” in the business world.
Being uncertain—and maybe even a little scared—is common. And, it’s probably healthy. After all, there are no guarantees that you will succeed.
And so, the more public declarations that you are in business, the more “real” it will all feel. A separate account, with its own separate correspondence and statements, is a very public declaration that your business is the real deal.
And it is something to be reckoned with.
Takeaways
When you open a business bank account, you do more than just start a relationship with a lender. You take a step to build corporate credit. You improve your standing with the IRS. And you assure prospects and clientele—as well as lenders and credit issuers.
And you even assure yourself about your corporation.
Contact us today. We would love to help.
The post Do I Need a Business Bank Account? Three Reasons Why You Do appeared first on Credit Suite.