Five Financial Products Every New Business Needs

There is a lot to organize when you’re starting a business. Between getting a license, registering your business, and securing the right equipment, it’s easy for some tasks to fall through the cracks. To help you out on your new business journey, we’ve compiled a list of five financial products every new business needs. This list is by no means exhaustive, and your needs will vary depending on your situation and type of business.

1. Business Bank Accounts

A dedicated bank account for business transactions helps separate personal and business finances, simplifies accounting, and provides a clear audit trail. It shows you’re an organized business owner and demonstrates professionalism and credibility to clients, vendors, and partners. Certain legal entities such as corporations and limited liability companies are legally required to maintain separate business bank accounts. Additionally, a business bank account is often required to access other business banking services such as business loans and credit cards.

2. Business Credit Card 

A credit card specifically for business expenses can help track and manage business purchases, build credit history, and separate personal and business expenses. A business credit card may also offer lower interest rates, lower minimum payments, and reward points. As your business grows, you can consider getting additional cards for your employees so you don’t have to deal with expense reports.

When applying for a business credit card, you’ll need to provide certain documents and information such as your Business Number, business registration documents, industry type, tax identification numbers, financial reports, and more. The specific requirements will vary depending on the credit issuer and your business’s circumstances. You’ll also need to provide personal information such as your Social Insurance Number, and you may need to provide a personal guarantee.

Your personal credit score will be taken into consideration during the application process. It’s important to note that credit inquiries will show up on your credit report and may affect your personal credit score.

Business credit cards aren’t just for corporations. If you’re a sole proprietor, freelancer, or independent contractor, you may be eligible for a business credit card.

3. Business Insurance

There are a lot of risks involved in running a business, and those risks grow alongside your business. Carrying adequate insurance can help protect you, should those risks become realized. Consider the following types of insurance:

• General liability insurance: helps protect your business if it causes bodily or personal injury or property damage.
• Commercial property insurance: protects your owned or rented building and equipment that you use to run your business.
• Business income insurance: Covers operating expenses and lost income if you can’t run your business because of property damage. For example, if your business is damaged in a fire, business income insurance will cover your lost income and ongoing expenses like utility bills and payroll. (Also known as business interruption insurance.)
• Professional liability insurance: Helps cover lawsuits claiming you made a mistake in the professional services your provided. In some cases, professional liability insurance may be included in your professional association fees. (Also known as errors and omissions insurance (E&O))

You may also need Worker’s Compensation insurance, data breach insurance, or commercial auto insurance. Often, multiple types on insurance can be combined in one policy. Specific business insurance needs will vary, so be sure to consult with an insurance professional and review your coverage annually.

4. Line of Credit

A business line of credit is a type of revolving loan where you can withdraw money as needed, up to a predetermined limit. You only pay interest on the portion you use, and the credit becomes available again once you pay it off. It’s a flexible and convenient form of short-term financing that’s helpful for managing cash flow or unexpected expenses. For example, a business line of credit can help you take advantage of great sale from your supplier, or it can help you make payroll when a client is dragging their feet on paying an invoice. Compared to other types of financing, such as term loans or credit cards, a line of credit can be more cost-effective.

5. Merchant Services

If your business accepts credit or debit card payments, you’ll need a merchant account or payment processing service to handle transactions securely and efficiently. There are several fees involved in accepting card payments, including transaction fees, discount rate, monthly fees, statement fees, chargeback fees, setup and application fees, equipment fees, and more. You’ll also want to research any contract terms, the reputation and reliability of the company, support options, and whether the system integrates with your other software systems. Ask fellow business owners for their merchant services experiences and recommendations.

Getting a business off the ground and running is a gargantuan task, and organizing the above financial products is only part of your to-do list. The good news is, once you’ve researched and set up these products, they require little day-to-day attention. Our team of business advisors at ABCU is here to help you choose all the financial products your business needs, and none of the ones it doesn’t. Call us to set up your meeting: 1-888-929-7511.