Business banking also known as commercial banking refers to a company’s financial interactions with a bank that offers services like credit, loans, savings and checking accounts.
Unlike retail banking, where common people use a bank’s services, business banking is intended solely for businesses.
Platforms like RazorpayX Business Banking+ offer a centralized dashboard where businesses can manage every facet of business finances – payroll, vendor management, payouts, payables and receivables and more.
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What is Business Banking?
Business banking includes all activities and services banks and financial institutions offer to businesses. Businesses and corporations have unique, complex financial needs that are served by a suite of financial products and services.
Business banking is also called commercial or corporate banking, depending on the size and complexity of the businesses serviced. For small and medium enterprises, business banking services are sufficient, but for larger companies and corporations, corporate banking or investment banking is required.
RazorpayX is a business banking suite offering a one-stop-shop solution to all your business banking needs. Manage payroll, procurement, payments and more, all from one single dashboard.
Difference between Business & Retail Banking
Quite often most small business owners & founders use retail banking services convinced that they don’t need business bank accounts. When in reality, business banking products are created to help make business money management seamless.
Here are some of the key differences between the two:
| Product Offering | Business Banking | Retail Banking |
| Checking and savings accounts | Yes | Yes |
| Certificates of deposits (CDs) | Yes | Yes |
| Money market accounts | Yes | No |
| Business loans | Yes | No |
| Business credit cards | Yes | No |
| Equipment lending | Yes | No |
| Payroll service | Yes | No |
| Business insurance & investment services | Yes | No |
| Asset management services | Yes | No |
How does Business Banking work?
Banks and financial institutions offer financial products and services to businesses of all sizes. These financial offerings are tailored to the unique needs of each business. For example, RazorpayX Business Banking+ has 3 tiers:
- Core, with the most fundamental banking features for businesses just starting up
- Pro, with reliable and scalable systems offering total control for mid-sized businesses
- Advance, with automated solutions for the complex needs of scaled-up businesses
Business banking services include loans, credit lines, deposit accounts, credit card services, investment advice, payroll and vendor management and more. Banks and financial institutions offering business banking services usually make money in the form of fees, interest or commissions.
Pros & Cons of Business Banking
| Pros of Business Banking | Cons of Business Banking |
| Segregates business and personal finances | Involves fees and additional costs |
| Organized business finances and payments, making tax payments and calculations easier | Requires documentation and compliance to get strated |
| Unique products and services to aid in business growth | Digital and tech-forward products and services have a learning curve |
| Business banking accounts offer enhanced security features compared to personal accounts | There’s no legal requirement to have a separate business bank account, especially for very small businesses |
Benefits of Business Banking
1. Clean & Accurate Bookkeeping
Starting a firm would mean creating a legal entity separate from you, and therefore, your personal finances. As a business owner, you must keep your money and your business’s funds separate, which will keep the tax woes that arise out of mixed funds at bay.
Needless to say, if your personal finances are mixed up with those of your business, separating them will be a time-consuming and difficult process.
Keeping a separate business account for all transactions would ensure that you have a clean record to provide your accountant with, every year. Bear in mind that you must keep all invoices and receipts to match up with your chequebook and bank statement. This will go a long way in keeping your financials clean and comprehensible.
In short, don’t mix your money with that of your business – open a business account instead!
2. Makes Tax Filing Easy
Mixing business and personal transactions over a considerable period can make your financials look confusing. More often than not, this is a direct result of not having a separate business account. It is vital that you sort all of this out, especially before their taxes fall due.
This distinction is critical if your business is being audited. The accounting requirements for any business are generally complex in nature. If all your funds are together, the classification of personal and business transactions can prove highly difficult. This can get you into trouble with the tax authorities.
3. Safeguard against Legal Liability
Regardless of its size, a business is vulnerable to legal issues for a dozen reasons. To avoid those, for starters, you must create a separate business entity to minimise the risk of losing personal assets if a lawsuit is filed against your business. You have several options – from a sole proprietorship to partnerships and corporations of various kinds.
When it comes to liabilities, the first thing that the courts look into is whether the business has a dedicated bank account or not. They also check if business funds have mixed with your personal funds.
4. Helps Build Business Credit
If your personal finances have mixed with business transactions at any point, then your personal assets may be at risk. This is why you must ensure you don’t use your personal bank accounts for business purposes after the incorporation of the business.
5. Lends Legitimacy to Business
Using a business bank while conducting transactions with suppliers, vendors, or clients makes your company more credible & legitimate.
Types of Business Banking
As the world evolved, so did business banking. Today we have both traditional business banking which operates from physical branches as well as digital banks that exist entirely online. Even though the services offered are mostly similar in these modes, digital banking has become more popular on account of its ease of use, smoother UI & smart dashboards.
Traditional business banking: These are organisations that are present in physical locations. They often provide the whole spectrum of banking services, such as credit cards, checking accounts, savings products, and loan products.
Digital business banking: This type of banking operates solely online. Online-only banks may typically provide banking products with cheaper costs and higher rates than their conventional counterparts since they don’t have to cover expenses like rent and utilities.
Types of Business Banking Services
Financing
Banks and financial institutions provide businesses with the money to expand, acquire new businesses or purchase equipment or raw material; or even just to keep up with rising costs. Banks and financial institutions offer different kinds of loans and credit lines: fixed term loans, asset-based loans, flexible credit lines.
Wealth Management
For medium to large-size businesses with large amounts of cash on hand, banks and financial institutions offer advice on how to most effectively put idle cash to use. This may include investing the cash in other businesses, government securities or other avenues to get the best returns.
Banks can advise on optimizing cash flow through concentration accounts, automated sweeps to maximize interest earned, and minimizing idle funds.
Cash Management
Businesses engage in hundreds, if not thousands, of cash and credit transactions every day. An important aspect of business banking involves managing receivables, payables, cash on hand and other highly liquid assets. Good cash management results in lower costs, more cash on hand and better resource allocation.
Payroll Management
Payroll makes up the biggest expense every month for most businesses. Most robust banks and banking service providers offer payroll management services. RazorpayX Payroll, for example, offers automated payroll and compliance, allowing employers to execute payroll with just 3 clicks. It automatically calculates TDS, taxes and other deductions, and with 45+ integrations with other HRMS, streamlines the entire payroll process.
Best-in-class Business Banking Experience
Most SMEs sideline the importance of business banking simply because they believe that retail banking could easily take care of their smaller financial needs. However, according to research, businesses lose over 67 lakhs every year on conventional banking systems.
Businesses are unique in their needs and styles of operations. But, business owners across the board seek business banking that is easy to work with, saves time and effort, and gives them a delightful experience by design.
Unfortunately, finding all of this with one business banking partner has long been difficult.
We decided to change that.
Armed with automation and built for future-forward businesses, RazorpayX takes care of your business banking, so you never have to worry about your money again.
With RazorpayX Business Banking, you can
- Scan and fetch vendor details, and automate your vendor payments
- Make tax payments from a single portal
- Put your payroll and compliance payments on autopilot
- Get collateral-free credit cards with flexible limits
… and a whole lot more.
Running a business is hard. Managing your business finances doesn’t have to be.
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FAQs
1. What is the difference between business banking and corporate banking?
While business banking and corporate banking differ in several ways, the major difference is that the former is for small companies and the latter is for large businesses.
2. What are the most popular services that business banking offers?
Some business banking services that business owners can avail are cash or treasury management services, bank financing, fraud protection services, payroll services, etc.
