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Banking and Your Small Business

Banking and Your Small Business

Why do I need a business account? What can my advisor do for me? What kind of fees should I expect? When should I involve my banker in my business expansion?

Banking and Your Small Business

Many entrepreneurs have these and other questions when it comes to their business banking, and many are surprised to learn how a commercial banker and the right products and services can help a small business succeed.

At an informal panel discussion hosted by the Thunder Bay & District Entrepreneur Centre, four local experts weighed in on how banks can be helpful. Here are answers to some of the most asked questions from small businesses:

Q: What is the difference between banks and credit unions?
A: The main difference comes down to ownership. Credit unions are not-for-profit cooperatives, owned by their members who all have a share in the organization. Banks are for-profit and are structured more traditionally as a business. Each institution offers different products and services and has varying levels of lending amounts, rates, and fees. You may consider all of these things when deciding what fits your needs best.

Q: Why do I need a business bank account?
A: Keeping your business banking separate from your personal banking is the best way to streamline your business operations and keep a clear paper trail. Having a business bank account helps to better organize your finances which is helpful at tax time and makes it easier to calculate profit, which can save a lot of time and money in the long run.

It is much more professional to have a business account, especially in the eyes of your customer. Clients will be writing cheques to the business, rather than the owner. Having a business account establishes credibility with the bank and build the relationship with your banker.

Fees are generally higher with a business bank account, as there are typically a higher number of and more involved transactions associated with business banking. Flexible options such as account switching for seasonal businesses, e-accounts, and other electronic business services are available through different banks and credit unions.

Q: When is the right time to talk to my small business banker?
A: The short answer? Right now.

If you are already operating a business, talk to your commercial banker. If you’re still in the planning stage of starting a business, talk to your commercial banker. Your business banker wants to help you succeed and can advise you at any stage of your business.

Q: What do banks and credit unions look for in a business plan?
A: Other than accurate projections and solid financials, lenders want to know your story. Your passion and purpose should show through. Banker want to see that you have deeply thought out your business idea and how you will make it viable. Your business plan should include information about your background (knowledge, experience, education) as well as show strong management capability.

Q: What are the most common mistakes to avoid?

A: Blending personal lines with business finances is one of the most common things entrepreneurs tend to do when they start a business. They may rack up personal debt that was acquired in relation to their business, which can be very difficult to reconcile when it is unclear whether or not it was for business purposes.

Many entrepreneurs do not talk to their bankers and do not ask questions, and miss out on what their advisors can do for them. Sometimes entrepreneurs make unwise decisions that affect their credit scores, which impacts their ability to access loans. A high credit score must be built over time by repaying debt in the form of loans, credit cards, and lines of credit before the due dates.

Even people with great credit have reason for caution. Those with a good credit score can very easily access the ability to borrow money. Access to a huge amount of credit poses a risk to banks and credit unions, so keep the amount of credit cards, lines, and other lending products under control.

The Thunder Bay Community Economic Development Commission (CEDC) and Thunder Bay and District Entrepreneur Centre offers FREE and confidential services to help small businesses start up, expand, and succeed. Their one-to-one business counselling, comprehensive information, consulting, and referral service make them a great first stop if you are starting a business or even thinking of starting a business. The Entrepreneur Centre (EC) can assist you to write a business plan, secure funding, and access other available resources. Call (807) 625-3960 to book an appointment or visit

Thunder Bay CEDC/Thunder Bay & District Entrepreneur Centre

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