If you’re an entrepreneur and you’re just kicking off your new business, the line between your personal funds and business finances may be a little blurred.
It can be hard to avoid this in the early start-up phase. But at what point should you get a business bank account? We answer this question, and consider the differences between this and a personal bank account.
Tip: Does your business need a small push? Consider a personal loan.
Personal versus business bank accounts
According to Zibu Nqala, FNB CEO Entry Wallet, both business and personal bank accounts are structured to provide customers with the transactional capability needed for their respective purposes.
“A personal account allows a customer to access their money easily and instantly. This account mostly comes with a debit card. A personal account is convenient, as it allows customers to link their accounts to perform transactions on digital platforms,” says Nqala.
“Business accounts give the customer access to unique business value propositions and value-added services that are tailored to business customers’ needs,” she explains.
Nqala says that registering your small business can seem like a big step, but for entrepreneurs it's a smart choice.
“As a small business owner, you want to establish and protect your brand. You also want to ensure that if anything happens to your business, your personal finances aren't affected,” says Nqala.
Most importantly, she says, a business account affords you the ability to track your finances and expenditures, and access records pertaining to these.
READ MORE: A business can also have a credit score
When should you consider opening a business bank account?
According to Lauren Deva, head of commercial transactional pillar at FNB Commercial, business customers should from the onset attempt to separate their business and personal finances.
“As a business owner, it’s important to remember that your company is an independent entity. It’s free-standing from you and your personal finances.”
The same applies to sole proprietors, and those who are self-employed.
“Self-employed individuals can fall into the trap of unintentionally mixing business and personal finances,” says Deva. “Not only does this expose the business to several risks, it also creates a bookkeeping problem with the entrepreneur failing to account for business expenses adequately.”
Deva notes further that, when applying for business credit, the business owner might be required to provide the bank with relevant information as part of the credit assessment process.
“The business may be impacted negatively if certain bank transactions are not reflected. The bank needs a holistic view and understanding of the business in order to grant credit.”
Having the right bank account also ensures you get the best support, Deva says, and that you avoid incurring unnecessary banking fees.
You can take out a personal loan to help build your business. Click here to find out more.