• July 26, 2014

Entrepreneurs Need a Business-First Banking Mentality

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Posted: Monday, March 17, 2014 12:00 am | Updated: 2:32 am, Mon Mar 17, 2014.

(Family Features) Owning a home-based small business offers undeniable perks - flexible hours, the ability to control your own professional destiny, even the option to work in your jammies if the mood strikes. But many first-time business owners operating out of the home underestimate important aspects of operating your own company - especially when it comes to finances.

Whether you're funding a startup or sustaining an existing enterprise, money management is a critical aspect of successfully running your home-based business. However, many first-time entrepreneurs make the mistake of treating their home business finances similarly to their personal accounts. In the long run, this can be a costly mistake, according to Jay DesMarteau, head of small business at TD Bank.

Checking accounts are the most popular financial products for small businesses, but a recent TD Bank survey found that more than 40 percent of small business owners are using the same account for business and personal use.

An important first step is to understand the distinctions between a business checking account and a personal checking account, and why the former is a safer bet for your business. Business checking accounts allow small business owners to:

  1. Manage your cash flow better. Small business owners have better cash flow management and more advanced payment capabilities when they choose business banking over personal banking for business.
  2. Build your business brand. Having a business checking or business debit card with your company name on it can help establish an identity around your business. Also, customers might feel more comfortable writing a check to a business instead of a personal account - it feels more professional.
  3. Simplify your accounting and bookkeeping. Having a personal checking account and using it for your small business means you aren't separating your business and personal finances. And that can make accounting and bookkeeping more complicated.

In many cases, business accounts also afford a different level of protection and security than personal checking accounts. "Small business owners take on risk," DesMarteau said. "A small business owner has better business fraud control when they use a business checking account compared with a personal checking account."

Choosing the right bank can also help you effectively manage the money side of your home-based business. The vast majority of small business owners (74 percent according to one of TD Bank's local Small Business Pulse Check surveys) rely on lines of credit for expenses such as product or equipment costs, rent and marketing. Selecting a bank that offers diverse account options, bringing you the whole bank, including business checking and lines of credit, as well as loans, savings and credit options, can prepare you to tackle any number of financial scenarios that arise as you build your business.

With proper financial guidance and a strong banking partner, small business owners can confidently focus on bringing their entrepreneurial visions to life.

For additional information to help assess your small business banking needs, visit www.tdbank.com.

Photo courtesy of Getty Images

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