Starting a small business is no small accomplishment, especially when it comes to managing your finances. One of the first steps many new business owners take is to open a business bank account. There are many different types of accounts available, and it can be hard to determine which is the right fit for you.

Let’s take a look at some of the different types of accounts and how they could serve your business needs.

Types of Business Bank Accounts

1. Business Checking Account

Business checking accounts are used for managing day-to-day expenses such as paying vendors, ordering supplies and covering normal business operations. They operate like a personal checking account but are often tailored for business transactions. While every financial institution is different, business checking accounts typically come with a business debit card for easy access to funds. They may also include features like unlimited transactions.

A business checking account is often essential to the daily management of your business. Plus, it helps keep your personal finances and business finances separate. When choosing a business checking account you may want to look out for maintenance fees, transaction limits, and other charges or fees.

2. Business Savings Account

A business savings account can help your business save money while earning interest. It allows you to start a rainy day fund for your business, where you can have funds set aside to cover future business needs or unexpected expenses. It can be a helpful tool to save and grow your business’s reserves, since you typically earn interest on the money deposited into the account.

These accounts may have limits on the number of withdrawals you can make each month. Exceeding this limit may come with a fee. There may also be a minimum account balance you need to maintain. Be sure to review all the terms and conditions before opening an account.

A business savings account can improve your business’s financial stability and provide a safety net when challenges arise. It may be a good idea to periodically review your savings goals and adjust to ensure you’re on track.

3. Cash Management Account

Cash management accounts (CMAs), are like combining your checking, saving and investment accounts into one. They’re often offered by brokers instead of traditional banks. This type of account gives you easy access to funds for transactions — plus the ability to invest extra funds without having to make transfers between different accounts.

CMAs often offer higher interest rates and fewer fees than other traditional business banks. Depending on the financial institution, they may also offer access to tools like a cash flow analysis, investment planning and automated bill pay.

However, a cash management account may be more complex to manage and the money in the account may not be insured by the FDIC. They’re also often offered through online institutions so you may not have access to in-person customer service or ATMs.

4. Merchant Account

If your business wants to be able to accept debit and credit card transactions from customers, you likely need a merchant account. These aren’t really bank accounts but a type of account that holds customer payments before transferring the money to your account. In general, you’ll work with a merchant service provider who will handle the payment processing. They will typically charge a fee for each transaction.

When choosing a merchant service provider, make sure to consider factors like transaction fees, terms and integration options. You may also be able to find processors that offer additional services like fraud protection. Doing a bit of research and comparing offers can help you find the best deal for your business.

5. Money Market Account

A money market account is a type of savings account that you can also use to make a limited amount of purchases. They may come with paper checks or a debit card. They provide easier access to funds than a normal savings account, but the number of transactions can be much more limited than a checking account.

These accounts may also offer higher interest rates than a savings account. However, that typically comes at the cost of a higher minimum balance. When considering a money market account, check all the terms and conditions including minimum balance requirements, interest rates and withdrawal limitations.

6. Business Investment Account

Business investment accounts allow a company to grow their wealth by investing in stocks, bonds, mutual funds and other securities. By investing in a diverse range of assets, businesses have the potential to earn higher returns than a traditional savings account.

Before deciding to invest, you should assess your company’s risk tolerance and investment goals. There is always a risk when it comes to investing and you should be aware that your portfolio can fluctuate depending on market conditions. You should also keep in mind that investments can be harder to liquidate if you’re in need of cash.

7. Business Trust Accounts

Business trust accounts are created to hold and manage business funds on behalf of a third party, such as the business owner. Much like a personal trust can hold a person’s real estate, investments and other assets, a business trust holds their stake in the company. The “trustee,” or person in charge of the trust, manages the business’s financial transactions for the third party.

How do I choose the right business bank account?

Choosing the right bank account will depend on your company’s unique needs and financial goals. A good place to start is by evaluating your business’s financial situation and assessing your goals.

It can be beneficial to consider what financial institution you choose — one with a good reputation that is FDIC-insured is often the way to go. Certain banks also offer other products and services like business credit cards, business loans and lines of credit, or bookkeeping services. You may also want to consider what perks and account features would be beneficial. Do they have a mobile app and online banking? Additionally you should be on the lookout for the types of account fees they may charge. Some common ones include:

• Monthly maintenance fees
• Overdraft fees
• Transaction fees
• Service fees

How do I open a business bank account?

The first step to opening a business bank account is often gathering specific information. This often includes documents such as your Employer Identification Number (EIN), Social Security number, business licenses and personal information of the small business owners.

You may also need to have money to make an initial deposit. This can vary depending on the financial institution you choose to bank with, and you may be able to open a business account without a deposit in some cases.

Once you’ve gathered your information and your funds, you can start researching different banks, credit unions and other financial institutions and their account offerings. After you’ve made a decision, you can apply for an account. In many cases this can be completed completely online.

The Bottom Line

When it comes to managing your business’s finances, choosing the right bank account is crucial. By understanding the different types of accounts and how they help a company, small business owners can make an informed decision that can help them reach their goals.

Whether you want to streamline transactions with a business checking account or grow your business’s funds through investing, there’s an option tailored to suit your needs. Keep in mind that your financial needs will change, so it may be a good idea to reassess your banking needs as your business grows.