What is business banking?

Business banking represents a large portion of any large commercial or even retail bank. Commercial banks are focused on banking and provide financial services for small to medium-sized businesses.

These services include depository accounts such as checking, savings, and payroll accounts. Other services include a variety of payment services to pay and collect payments from consumers and other small businesses and vendors.

Payment services such as ACH, debit cards or credit cards, and point-of-sale terminals are essential to running any small business today. Whether you are in the restaurant business or an online software company, collecting payments are essential to the cash flow of a small business.

Other critical banking products such as lines of credit, working capital loans, equipment financing loans, and brother SBA loans are all within the offerings of a well-run commercial bank.

There are large retail banks that focus on consumers and also have a division to cater to small businesses. Their business banking needs and the business owners' private banking needs are all served within a retail bank with a commercial banking arm.

Business Banking - DDA or Demand Deposit Account

One of the most basic products a commercial bank offers is a checking account. This is also called a demand deposit account, where small businesses can take their earnings and deposit their earnings into a safe and secure location, e.g., a bank account. 

If the business owner needs to pay their employees or vendors, he or she can take money out of the business banking account and pay their respective parties.

The commercial bank’s relationship with a small business owner always starts with a checking account. Once the relationship banker gets to know the business and the business owner, other product offerings will start presenting themselves. 

However, this checking account is the lifeblood of how business owners manage their cash flow, and usually, small business owners have multiple accounts to keep track of their revenue, payments to vendors and employees, and savings accounts for excessive profit.

Business Banking - Debit Card and Credit Cards

The second most popular banking product is probably credit cards and credit cards. Small businesses often need to make purchases from retail locations to supply their business, and a debit card or a credit card is very convenient for small business owners to make these purchases without having to carry cash or write checks from their checking accounts.

These debit and credit cards often carry reward points, just like a personal credit card. Small business owners often enjoy these reward points to provide perks for their businesses or employees.

Business Banking - Employee Debit Card and Credit Cards

As the business grows, business owners may need to delegate certain activities to key employees. Commercial banks and fintechs are offering credit cards and debit cards with certain controls for employees to use to make routine purchases or when they travel for business.

It is convenient for small businesses to track and limit employee spending, lessen the need to track receipts and provide a central location to send all of the expense reports and data to their CPAs. 

These expensive tracking systems with card management platforms are very convenient for small businesses to manage their spending.

Business Banking - Loans and Working Capital

From time to time, business owners need to expand their business by hiring additional staff, expanding their inventory, expanding their location, and purchasing additional equipment. Commercial banks often fill in the void and offer working capital loans, equipment financing loans, and a line of credit for small businesses to draw upon in accordance with their expanding plan.

Since commercial banks have a preexisting relationship with the business owner, they often pre-approved financing for small businesses. Commercial banks have the unique advantage of analyzing the businesses’ cash flow position from their DDA account activities.

LendAPI Business Account Opening 

We have an out-of-the-box business account opening process that any bank or credit union can immediately start taking applications and expanding their SMB segment. This system is linked to our partner PortX and can be easily integrated into most of the bank cores, such as Thought Machine, Jack Henry, Mambu, and Fiserv. 

For a live demo, please visit bankdemo.lendapi.com and sign up for a free account. The demo site comes pre-loaded with bank opening application data where you can walk yourself through the entire experience with ease. As always, write to us at info@lendapi.com. We will be glad to help.