Modern Startup: Exploring your business banking options

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Many people may not know this, but Modern Mississauga is an independently-owned magazine that started out as nothing more than an idea between two friends who wanted to give back to the community that they love. That idea turned into a startup business, and those friends became entrepreneurs, which meant navigating a whole world of hairy questions. What are the procedures for incorporation? What’s the best way to create and maintain a website? What can we do in-house, and what needs to be done by an outside party? What accounting software is best for our needs? What are our banking options?

In our Modern Startup series, we try to tackle these questions and many more by sharing with you, the readers, our own personal experiences. Let's start by exploring some banking options.

Where should I start?

At minimum, you’re going to need a business chequing account. While you should look into as many options as you can, the best place to start is with the same bank that you already have personal accounts set up with. Since you already have a relationship with them, your banking history might mean fewer hoops to jump through, more favourable terms for things like hold limits, and even pre-approvals for credit options like overdraft protection. Also, having your business and personal accounts with the same bank can make it easier to transfer funds between them, which you may need to do in the early startup phase when you’re covering most of the costs yourself.

What should I look for in a business chequing account?

There are a lot of things you should be looking for, but two factors are generally the most important – Fees and Customer Service.

Fees: You’ll want to keep an eye out not just for the monthly fee, but also what your bank charges per transaction and per deposit item, and how many transactions and deposit items are included in your monthly fee. You’ll also want to be aware of the distinction between these terms – for example, if you deposit ten cheques in one bank visit, that’s one transaction but ten deposit items. Almost everything you do – withdrawal, deposit, bill payment, transfer between accounts, etc. – is a transaction. One of the few examples of a “no-charge transaction” that doesn’t count towards your allotment at most banks is a Point of Sale deposit – i.e. if someone pays you with a credit card – but you should read the fine print carefully to see what is and isn’t included in your account.

Customer Service: This is a more nebulous category, but in our opinion, one of the most important for a young startup. This includes convenience features like branch hours and number of locations, but more importantly, how does the bank make you feel? Do they have a dedicated Small Business Advisor? Are they available when you need them? Can they answer your questions confidently? Can you call your branch directly or do you have to deal with a call centre?

Is customer service really that important?

We looked at several banking options and settled on a TD Every Day Business Plan for our chequing needs. Though it wasn’t the cheapest option we looked at, we chose TD for their flexible hours and the fact that our personal accounts were also with TD, but most of all, what tipped the scale was our Small Business Advisor. She worked diligently with us on all our needs, was available to meet with us in the evenings, and continues to be a source of advice and support long after opening the account.

I want to contrast this with our experience at another banking institution, which we considered because of their lower fees. To set up our initial appointment, we had to go through a call centre, who booked us for a Saturday meeting with a business advisor. When we arrived, we were told that the business advisors don’t work Saturdays, but someone there tried to help us anyway. They didn’t have an intimate familiarity with the accounts we were asking about, and couldn’t provide answers to many of our questions. To top it all off, they informed us that they wouldn’t even be able to set up certain accounts even if we wanted to proceed, and that we would have to come back to meet with an actual business advisor, who wasn’t available on evenings or weekends. While low fees may be tempting, sometimes you get what you pay for.

What other accounts will I need?

A chequing account is an absolute must, but an entrepreneur may want to look at opening up a business credit card account for keeping business spending separate and easy to keep track of. Business credit cards can also offer attractive bonuses, such as cash back, travel rewards, extra insurance for purchases and car rentals, and more. A few of the better options to consider are the Scotia Momentum for Business VISA, with an industry-leading 3% cash back on certain types of purchases, and the RBC Business Cash Back MasterCard, one of the only business cash back cards with no annual fee.

Are there any accounts geared specifically towards digital-only businesses?

RBC offers a unique account that’s not heavily advertised called the RBC Small Business eAccount. This account has no monthly fee and includes unlimited “e-transactions” – bill payments, debit card purchases, transfers between accounts, etc. – but has relatively steep fees for anything not considered an “e-transaction,” including cash and cheque deposits, or most situations where you would need to interact with an actual human bank teller. This account isn’t for everyone, but if your startup is entirely digital, e-commerce or internet-based, it may be worth looking into.