If you are starting your own business, it is essential to establish a relationship and set up accounts with a bank. Not only will they assist you in storing, transferring and receiving funds, they will be able to offer you financial advice, financing, lines of credit and cash management services to assist you in managing your financial affairs and growing your business. Your first decision will be which commercial bank you choose to work with - you may benefit from also setting up your personal accounts with the same bank or one of its subsidiaries.
How to choose a bank
The Australian banking sector is dominated by four major banks, who offer a huge range of financial services including both personal and business banking. The four major banks are:
- National Australia Bank (NAB), with subsidiaries including
- MLC limited
- Commonwealth Bank (CBA), with subsidiaries including
- Commonwealth Securities
- Colonial First State
- Australia and New Zealand Banking Group (ANZ), with subsidiaries including
- Westpac (WBC), with subsidiaries including
- St George Bank
- Bank of Melbourne
- BT Financial Group
- Trust Bank
Most businesses and individuals are well served by one of these four providers (or their subsidiaries), as they have the most control over financial markets and the largest access to capital, and therefore the most to offer their customers.
What banking services do you need?
Every business requires business banking accounts so that they can receive, store and transfer funds. There are three main types of bank accounts available for businesses and individuals:
- Cheque accounts: used for everyday transactions such as shopping and paying bills. There are typically limits on the amount of money that can be transferred daily and most have monthly fees.
- Savings accounts: these accounts earn interest based on their account balance, with some offering higher interest rates at the cost of less withdrawals.
- Term deposit accounts: these accounts typically have a minimum required balance and minimum terms until withdrawal, but they offer significantly higher interest.
In addition, you may consider the following banking services:
- Line of credit / business overdraft: businesses can gain access to a line of credit or overdraft, which will differ in size depending on the cashflow and revenue of the business. A line of credit allows you to pay suppliers on time even when you are still waiting for your customers to pay you. This takes a lot of pressure off your cashflow, though it is important to ensure you do not misuse the credit and pay unnecessary interest.
- Cashflow management services: there are a number of services bundled under this term, which include business credit cards and online banking tools. These assist you in getting funds more quickly and paying suppliers on time.
- Financing: in many situations, banks are willing to front the capital required for you to grow your operations or acquire new assets and equipment for you to be more productive. The bank will want to see financial statements and business plans to justify their investment in your business, and you will be required to pay them back with interest.
- Merchant services: includes systems like EFTPOS and online payment gateways to assist your business in taking payments from clients and customers.
- International banking services: including foreign currency exchanges and international bank transfers.