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Choosing the right business bank account can make managing your finances easier and less expensive. But the account that worked when you first launched your business may not be the best fit once your company has grown. Higher fees, transaction limits, poor customer service, or the need for more sophisticated banking products are all good reasons to consider making a change.
While changing business bank accounts may seem like a hassle, the process is usually straightforward when you take it one step at a time. By opening a new account before closing your old one and carefully transferring payments and deposits, you can avoid disruptions to your day-to-day operations while finding a banking relationship that’s better suited to your business. Here’s how to switch business bank accounts, one step at a time.
Key Points
• Business owners should review their current account to see which tools and services they use most, then research banks that offer accounts with these features and lending options relevant to the business before choosing a new account.
• Funding the new account with a small amount first allows transactions to begin, after which recurring payments like payroll and supplier invoices can be rerouted to the new institution.
• Customers and vendors must be notified about the new business banking account so incoming payments are redirected correctly during the transition period.
• Switching a business bank account typically takes about a month, though business owners may want to allow up to four business weeks longer to make sure that all recurring payments have been transferred.
• When a business owner selects a new business account, finding one with fees, limits, and related products that match the business’s needs is key.
Signs It’s Time to Switch Business Bank Accounts
As your business matures and expands, your banking needs will likely change. The following may signal that it’s time for a new account:
• Your business has changed ownership — say you bought out a former partner, for instance — and it’s necessary to open a new business account that doesn’t include them.
• Higher or rising fees, such as monthly maintenance costs, are eating into your profits. Fees for things like wire transfers or overdrafts can range widely among banks. It’s often worth looking for options that offer lower fees (while meeting your other needs).
• You’re bumping up against account limits, such as deposit limits, monthly transaction limits, or wire limits.
• You’re finding it difficult to get a small business loan from your bank.
• Customer service is poor. For example, you might have a hard time reaching someone to help you, answers to questions may be unhelpful, and support may not be timely.
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How to Change Business Bank Accounts
When it’s time to change business bank accounts, it helps to be organized. Consider the following steps.
Step 1: Evaluate Your Current Account
Spend some time thinking about your current account. What are the tools and services that you like, use often, and would want to carry over to a new account? For instance, are there business checking account features you prefer or bookkeeping software you’ve come to rely on?
Also consider what’s not working for you. Are you able to get a loan? Does customer service offer timely support or are wait times long?
Finally, think about other banking services you might want. Are you looking to use a business loan? What options does your bank offer and do those choices meet your needs? It’s often easier to secure a loan when you already have a relationship with the bank. So if there are appealing business loans at another institution that you’re interested in, you may want to consider switching your account to that bank.
Step 2: Research and Open a New Account
Spend time researching banks that offer the accounts, services, and tools that you need, including lending options. Once you’ve homed in on a bank you like, you can usually open an account online. This will require providing some personal information, such as your name and Social Security number, as well as information about your business, such as your tax ID number, or employer identification number (EIN), and documentation about the type of business entity you own.
Note: You may find the account that you need is simply a different account at the bank you already use. If this is the case, contact your business banker and they can help you make the change.
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Step 3: Fund Your New Account
Once you’ve opened an account, you can start by funding it with a relatively small amount of money. This will allow you to start making transactions from this account.
Step 4: Transfer Recurring Transactions
Next, move recurring transactions to this account, including payroll payments and payments to suppliers and other services and vendors. Reroute incoming payments from customers as well, letting them know there is a new account to which they should now be sending funds. This will help ensure that your cash flow remains uninterrupted so you don’t need to take out a cash flow loan.
Monitor transactions in your old and new account for a month or two to make sure everything is operating correctly. Doing this will give you a chance to see if you forgot to move over any recurring transactions and they’re still operating in the old account. It’s also important to keep some money in your old account as well during this interim period until you’re sure all the needed transfers have been made.
Step 5: Close Your Old Account
Once everything is moving smoothly and you’re sure all recurring payments have been switched over, it’s time to close your old account. At this point you can transfer all remaining funds to the new account.
You’ll also want to find out from your old bank what they’ll do with any funds that may be accidentally sent to your old account.
When you close the account officially, you may have to do so over the phone or even in writing. Have your old bank send you confirmation that the account is closed and save it in your records.
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What to Look for When Switching Business Bank Accounts
As you’re switching accounts, try to be sure you find a new one with fees and limits that match your needs.
If there are fees, find out if there are conditions under which the bank may waive them. You might also want to ask if there are extra fees for deposits made in cash.
Research whether there are minimum balance amounts that let you avoid penalties, and find out what the deposit limits are. It may be worth searching around for an account that has no limits.
If possible, look for accounts at financial institutions that can meet your product needs, including small business loans, lines of credit, merchant services, payroll support, and business credit cards.
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How Long Does Switching Business Bank Accounts Take?
Safely switching over a business bank account usually takes a month, though you may want to extend this period for up to four additional weeks. As mentioned above, this gives you time to open the new account, move over recurring transactions and payments, and keep the old account open long enough to see whether you missed any transactions. Once you’re satisfied that you haven’t, you can close your old account for good.
The Takeaway
Switching business bank accounts may take a little planning, but it can pay off if your current account no longer meets your needs. Make the transition gradually; choose an account with the features, fees, and available financial products that support your business; move recurring transactions carefully; and keep your old account open until you’re confident everything has been transferred. Using a thoughtful approach, you can make the switch with minimal disruption and position your business for its next stage of growth.
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FAQ
What do I need to open a new business bank account?
To open a new business bank account, you’ll need your government ID, your tax ID number or Social Security number, and your personal information, including date of birth, home address, and phone number. In addition, you’ll need your business documents, such as a business license and articles of organization for a limited liability company (LLC), articles of incorporation for a corporation, or a partnership agreement.
Can I switch business bank accounts without losing money?
When you make a slow transition to a new business account, carefully moving transactions over, you should be able to avoid losing money. If you’re too hasty when closing your old account, however, you could miss payments and be subject to fees.
Should I close my old business bank account right away?
Don’t close your old business account right away when you switch business accounts. Instead, keep it open for a month or two until you’re sure you’ve successfully moved all transactions to your new account.
What happens to recurring payments when I switch business bank accounts?
When you switch business accounts, recurring transactions do not automatically switch to your new bank account, so it’s important that you manually transfer them to ensure that incoming and outgoing payments continue.
Is it hard to switch business bank accounts?
It’s not difficult to switch bank accounts. It does pay to do so carefully, though, so it’s wise to choose the account that’s right for you, make sure recurring transactions are moved to your new account, and ensure that everything is operating smoothly when you finally close your old account.
Photo credit: iStock/Choreograph (Konstantin Yuganov)
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