Why you need a business bank account
It’s easy to overlook the value of a business bank account, especially if you’re an entrepreneur who’s just starting out. While it might not be mandatory for your business, and the prospect of opening one can seem overwhelming, a dedicated bank account can help your business grow and succeed.
At Azlo, we believe that a business bank account isn’t just a place to store money and make payments. It’s a tool to learn about and improve your business’s financial health. It can also help your business make a positive impression on clients and potential investors or lenders.
So, if your question is whether or not you need a business bank account, our answer is an emphatic yes (whether or not you decide to open one with us). Here are some of the things that a business bank account can do for you.
1. Track your cash flow
If your business income and expenses go through your personal bank account, it makes it hard (sometimes nearly impossible) to know your business’s cash flow.
Cash flow (which just means how much money flows in and out of your business and when) is one of the most crucial factors in your business’s success. According to a study by U.S. Bank, 82% of business failures are due to cash flow problems.
A business bank account won’t necessarily prevent or solve all your cash flow problems, but it can help you easily access and analyze your cash flow data. This will help you catch problems quickly and solve them strategically.
2. Help you apply for business loans
If you apply for a business loan, most lenders will ask you for bank statements or other records of your business income and expenses.
A dedicated business account will allow you to quickly apply for loans and make it easier for your lender to get a clear picture of your business’s financial health.
3. Make your business look good
If you don’t have a business account, you’ll have to ask clients to write checks to your name instead of your business name. You’ll also have to make payments (whether to employees, vendors, or contractors) under your own name.
Opening a business account will allow you to accept deposits and send payments under your business name, making your business look more professional and established.
4. Save money on your taxes
The IRS specifies that only a business can ask for business deductions, and you can’t deduct
expenses if they consider your business to be a hobby. With a separate business bank account, it’s easier to see eligible deductions and include them in your tax return.
If you include business income on your personal tax return, a business account can also help you take advantage of significant tax discounts on pass-through income.
What to look for when choosing a business bank
Only you can decide what’s is the best fit for your business. In general, though, convenience and low fees are important factors for your first business bank account.
A recent study by Nav noted “50% of business owners without a business bank account want to open one but haven’t had the time to set one up.” If you’re in that group, look for a bank that offers quick and easy account set-up, either online or close by.
Low fees are also important, especially for smaller businesses (since fees can easily eat into your profit margins). Business bank accounts are often somewhat more expensive than personal checking accounts, but there are low-fee options out there. Keep an eye out for transaction limits, maintenance fees, and minimum balance requirements.
At Azlo, our goal is to make business banking as effortless and approachable as possible, so our accounts come with no fees, no balance requirements, and convenient online setup. If you’re curious to learn more about us, take a moment to explore our features or send us an email at info@azlo.com.
