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Whether you are the owner of a small business or the sole owner, you will need a business checking account when applying for a business loan. A business checking account not only settles your finances and separates them from personal expenses, but also requests it when many lenders apply for a business loan.
As someone who runs my own small business, having a business checking account is not only essential to maintaining accurate financial records, but it also provides valuable insight into how I run my business. Lenders may need this important information in case they apply for a business loan in the future.
Why you need a business checking account for many business loans
Lenders will prefer to lend to small business owners with checking accounts for several reasons.
Business checking accounts can provide lenders with snapshots of business revenue, transactions and expenses. Maintaining all transactions through business accounts provides accounting and filing taxes, and sources of truth all around.
Lenders can view cash flow, verify revenue and analyze business activities. This is essential for running your business.
Business checking accounts also provide legitimacy to your business. It shows your business as a separate lender from your personal expenses. It is also clear that they run something more serious than hobby, and they have actual income and costs.
You may be able to find lenders who offer business loans without a bank account, but you will likely need to provide documentation in other formats. Business lending alternatives such as Merchant Cash Advance may consider future sales and current transactions, but these are often risky lending options.
How business accounts differ from personal accounts
Business checking accounts differ from personal checking accounts in many ways
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Business check |
Personal check |
|
|
Main purpose |
Management of business income and expenses |
Personal expenses or household finances management |
|
Account name |
Legal business name |
Individual names |
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function |
Deposits, withdrawals, check writing, ACH transfers, debit card payments |
Deposits, withdrawals, check writing, ACH transfers, debit card payments |
|
Opening requirements |
Government issued IDs for each stakeholder Employee identification number or social security number Business License or Registration Business Formation Document Do business as a (DBA) certificate if applicable Initial deposit |
ID issued by the government of each accounting successor Social Security Number or Individual Taxpayer Identification Number (ITIN) Proof of residence may be required Initial deposit |
|
Prices and minimum prices |
Usually, there is a high minimum balance requirement and monthly fees |
There may be monthly fees and minimum balance requirements |
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Optional services |
We may offer the following options: Employee debit cards |
Paying online bills Transfers between accounts Using a debit card |
Lenders requiring a business checking account for loans
Not all lenders will disclose in advance if you require a business checking account for your business loan application, so if you are unsure of the requirements, it is best to check with a specific lender.
The lenders we confirm require a business checking account.
How to get a business checking account for business loans
The process of opening a business checking account so you can get a business loan is simple, but it can take some time to compare the features you need from your account.
The first step to getting a business checking account is to compare the best accounts from different banks with the features that complement your business. Be sure to compare:
- Minimum sales balance requirements
- Bank Fees
- Interest checking account interest rate
- Bank location and ATMs
- Digital Tools
The next step is to collect the necessary documents, such as tax forms, business licenses, and business checking account applications. Many banks list the documents they need online, saving time during the application process.
Many banks can open business checking accounts online. However, you may need to go directly for your traditional bank account. In this case, we will work with the bank representative to open an account. Once there, you will review your bank contract, sign it, and present your cash deposit.
Opening a business account requires several important steps, including:
- Identifying two forms
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Employer Identification Number (EIN)
- Proof of business organization
- DBA Document (Doing Business), if applicable
- Deposit amount
Conclusion
Having a business checking account when applying for a business loan can make the loan process easier. Though not all lenders are required, most people want to check their business checking accounts to see their revenue, expenses and make sure they can pay off their loans. It is also a best practice for separating your business from personal expenses, including tax purposes. Additionally, business checking accounts may include features that support the operation of your business, such as employee debit cards and payroll processing.
