If you are starting or planning to start a small business, banking products like business accounts and commercial loans are essential. If you already have an established business, you might need a hand with the costs of expanding your business. This is where financial institutions like Webster First Federal Credit Union come in. As one of the top commercial lenders in Massachusetts, they provide loans and solutions that help your business grow. When choosing a financial institution for your business banking needs, here are a few important things to know.

Why you may want a business account

Whether you are accepting or spending money for your business, the IRS and Small Business Administration (SBA) advise that you keep those funds separate from your personal accounts for tax filing purposes. Aside from this, here are some other reasons a business checking account, savings account, or credit card can be beneficial.

Professionalism: Having a business account means your business name will be on your checks and possibly your business debit/credit cards too. Likewise, if one of your customers needs to pay you by check, they can make it out to your business instead of directly to you.

Employee or accountant involvement: You may want to allow an employee to access your business account if you won’t be managing day-to-day expenses by yourself. Someone such as an accountant or payroll manager, for example, shouldn’t be seeing your personal transactions mixed in with business transactions.

Extra earnings: Opening a business savings or money market account can help you earn more from your business funds. These accounts pay interest or dividends, so the more money you keep in them, the more you can earn.

Higher spending limits: Business credit cards will typically have higher spending limits than a personal credit card. Some credit card companies may check personal credit scores, while others may only check business credit scores. This means your approval odds could be greater and your credit limit higher.

Documents you’ll need to open a business account

Some of the most common documents you’ll need to provide to open a business account are:

• Personal Identification (driver’s license, passport, social security number)
• Employer Identification Number (EIN)
• Business License
• Ownership agreement
• Formation documents (LLC or DBA certificate, articles of incorporation/organization, etc.)

How commercial loans can help your business

There are several types of commercial loans that can benefit your business for different reasons. If you’re just starting out, you may need a loan for a space to run your business, equipment necessary to operate, or advertising. If you have an established business, you may need a loan to refinance or consolidate existing debt, renovate, or expand to additional locations. These are just a few examples. There are many possibilities for commercial loan use.

In addition to helping grow and expand your business, commercial loan interest can be deducted on your taxes which will reduce the overall amount you owe. Consult a tax professional or Certified Public Accountant to find out what else you may be able to deduct for your unique business.

When should you apply for a commercial loan?

Commercial real estate loans could require that your business be in operation for at least two years. This is to show you have a history of management experience and sound finances. Commercial term loans on the other hand may be more lenient on operating time and are a popular loan type for businesses with little to no credit history.

Businesses operating for longer periods of time will have greater approval odds for a loan. Businesses with great credit scores and strong revenue are also likely to receive lower interest rates. It’s important to plan ahead, check credit scores, and make sure you will meet all your lenders requirements before applying for the loan.

When shouldn’t you apply for a commercial loan?

What you should not do is wait until your financial situation is dire to apply for a loan. If you have high debt, low account balances, or a low credit score, you are not only at risk of receiving a higher interest rate, but you will also be at risk of being denied the loan. A denial means you have an inquiry on your credit report which could cause your score to drop. Depending on how bad your situation is, it could also lead to not being able to pay employees, not being able to pay a lease, or in the worst case, business closure. Savvy business owners take out loans before they really need them.

Things you’ll need to apply for a commercial loan

You’ll likely need all of the same documents required to open a business account, but additionally you may need:

• Income tax returns for the last 2-3 years
• Financial Statements
• Bank statements going back up to 1 year
• A business plan
• A résumé (typically for newer businesses)
• Collateral

The bottom line

With all these options for accounts and loans, business owners should be taking advantage of them as much as possible. Business accounts make managing your finances easy. While many business bank accounts have monthly maintenance fees, high minimum balance requirements, or deposit limits, Webster First accounts do not. Meaning your hard earned money stays in your account where it belongs.

When you need a hand, their highly knowledgeable commercial lending team can help you choose which loan is right for your needs. They even offer a payment processing solution to make accepting debit and credit card payments from your customers simple. So, what are you waiting for? Your dream business is just around the corner!

Angela Talbot is a marketing specialist at Webster First Federal Credit Union.