November 16, 2020

Should You Open Multiple Business Bank Accounts?

Still, the U.S. Small Business Administration recommends opening a business bank account as soon as you start accepting or spending money on behalf of your business. Most business accounts offer features that personal bank accounts don’t. Not to mention, having one protects your business and makes you look more professional. Interestingly, many business owners take the SBA’s advice a step further and choose to open multiple business accounts. But are multiple bank accounts always necessary? To help you determine if this approach is right for your business, consider the pros and cons first.

The Benefits of Opening More than One Business Bank Account:

1. Helps You Stay Organized

Different bank accounts can serve various business needs. For example, you may designate one account for funds coming into the business, one to pay taxes and other routine expenses, and a third to save for emergency expenses. Keeping separate accounts for each of these functions can give you a clear picture of where your finances stand and can keep you on track with your long term goals. In addition, you may benefit from different account features. For instance, you might need a lower minimum balance for your expense account, while a high-interest business savings account with a higher minimum balance might be more appropriate for your rainy-day fund.

2. Establishes Multiple Track Records

As your business grows, you may need additional financing to bridge gaps in cash flow or pursue expansion opportunities. Successfully maintaining multiple business bank accounts can help you establish a proven track record of managing your finances responsibly. When you apply for a business loan, most lenders make you disclose detailed records of your finances — both business-related and personal. Many lenders won’t even consider you for a loan if you don’t have a dedicated business bank account. However, if you have a history of healthy cash management, you may have better luck convincing the lender of your creditworthiness.

3. Provides Additional Security

Unfortunately, security threats aren’t something your business can afford to ignore. In fact, 60 percent of small businesses say attacks are becoming more severe and sophisticated, according to a recent study from the Ponemon Institute. While it’s not guaranteed, keeping your business’s funds in more than location may help protect you if criminals hack into one of your accounts. At a minimum, you should ask your bank about adding protections to your account when you open it. In addition, if you have business credit card or debit card accounts, you'll need to ensure these account are kept secure. This way, you can lessen the chance that an outsider gains access to your business's accounts.

The Cons of Opening Numerous Business Bank Accounts:

1. Requires More Effort to Manage

One of the downsides of having more than one bank account is that you — or someone on your team — must pay close attention to each of them. Since overdraft charges can get expensive (and make you look bad if they happen routinely), you don’t want to chance having inadequate funds in one of your accounts when a bill is due. This may require you to make frequent transfers between accounts to ensure you’re flush. While it’s certainly not impossible to manage, it may take a bit more effort than having a single account.

2. May Entail Unwanted Fees

Many banks require a minimum balance to maintain a business bank account. As a new business owner, meeting the minimum balance in one account can be challenging, let alone meeting multiple minimums. This can add unnecessary stress when you’re trying to get your business off the ground. Before opening multiple accounts, be sure to ask about each bank’s policies and the penalties for not meeting them. On average, banks charge customers anywhere from $15 to $25 per month if the minimum balance on a business checking account isn’t met, and other hidden fees may apply.

Should You Open More Than One Business Bank Account?

Having multiple business bank accounts can keep you organized, more secure, and may even help your business obtain financing down the road. On the other hand, some new business owners may find managing multiple accounts challenging and unnecessarily time consuming at first. Ultimately, the right solution for your business depends on your financial circumstances and goals. While more than one account may not be right for you today, you can always consider opening more as your business matures.
Editor’s Note: This post was updated for accuracy and comprehensiveness in November 2020