Miranda Marquit is the author of Planting Money Seeds, a website dedicated to helping people grow their wealth. We talked to Miranda about tips for small business to find the right bank.
The Great Recession saw an unprecedented rise in entrepreneurship - a silver lining to what was otherwise a bleak economic era. Skyrocketing unemployment, rampant layoffs, and a lack of traditional employment opportunities forced many who would have otherwise been reluctant to go into business for themselves.
Owning a small business is a dream for many of us. Although it might be a while before we can afford to vacation on white sandy beaches, owning a small business is rewarding in its own right.
Now that the Great Recession is becoming a distant memory, many of the small businesses founded during that time are becoming established companies, requiring the same business tools as any Fortune 500 company.
Small business owners need to cut overhead, construct solid business plans, and keep track of their money. They also need adequate banking solutions to help their business really flourish into what it could be.
You've stated, "One of the most important things you can do for your home business is to keep it separate from your personal expenses." Why is this so important? What are some of the risks of not having a separate business account?
Keeping everything separate makes it easier for record-keeping and tax purposes. You want to make sure that everything as accurate as possible, in case the IRS needs more information. It also separates liability. This is especially important if you have a separate business entity, like an LLC or corporation. Separating everything can limit your liability to some degree.
You've also recommended doing some homework before starting a business bank account. What are some questions people should be asking themselves for finding the right bank?
Some of the things to consider should include:
- Whether or not you need special services.
- Are you hoping for a small business loan?
- Do you need investment help?
Consider whether or not you need remote deposit services for checks. Decide on your needs and consider working with an experienced business adviser.
Some financial advisers consider either spending 20 hours-a-week on a small business or earning 50% of your total income as a gauge that it's time to start a business account. Is this a good rule of thumb, or should a small business start earlier?
The 20 hours-a-week is a good rule of thumb. However, if you want to make sure that you have separate records, opening an account as early as possible can help you better manage your records. If you can find a free business checking account, open one. Even if you don't qualify for a business account, you can open a regular checking account, just to keep finances separate.
A lot of people are abandoning time-honored business models, such as the 5- or 10-year plan, in light of the accelerated digital economy. How can having a clear vision of the future affect a small business owner's banking decisions?
Having a plan is a good idea when it comes to your business. Even if you are just making a six-month social media campaign plan, it's a good idea. A clear vision allows you to move ahead. Having that clear vision assures banks that you have a plan and that you are a good risk.
Certain banks offer financial adviser services for small businesses as a perk. How might someone go about finding a bank with these services in their area? What are some things that a financial adviser can do for a small business owner?
A financial adviser can help you set goals and manage your money. Call around to local banks and ask what business and financial advising services are available.
Do you have any general guidelines for how much cash a small business owner should have on hand to keep their bank account safe and secure?
It's more about what makes you comfortable in terms of how much to keep on hand. You want enough to handle most minor emergencies, though, so that you don't have to dip too far into debt to handle unexpected items. Figure out what would make you comfortable, and work toward saving that amount.
In your post, "Assembling Financial Management For Your Small Business," you talk about the two most important banking features being the best rates for loans or lines of credit, and customer service. Can you give an example of what a good loan rate might look like? And how should they research a bank's customer service?
You can expect to pay between 5% and 8% for a good rate. Researching customer service can be a little more difficult. One thing you can do is make an appointment to have a discussion with one of the bank's business specialists. Often, you can use your gut to make these types of decisions.
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