Why Small Business Owners Love Online Banks
The days of the traditional suit-and-tie “businessman” are long gone, and the dream of owning a business is accessible to any entrepreneur with an idea and the drive to make it happen. While there is no secret list of qualities that make up a capable business owner, there is a common denominator among these entrepreneurs.
Above all, they know how to manage expenses and keep costs down.
That’s why small business owners love online banks. As an alternative to the common in-person banking experience, online banks provide safe and convenient banking options for businesses at any stage of the game.
Online banks can provide better returns, lower transactional fees, and a myriad of digital tools made to streamline everyday banking activities with room for business growth. Let's take an in-depth look at the reasons why smart business owners love online banks.
Reason #1 – Better Returns
Online banks operate entirely on the digital realm, which means they have minimal overhead costs. Because they cost so little to run, online banks can offer clients highly competitive rates on their accounts. According to the Federal Deposit Insurance Corporation (FDIC), the average interest rate of a checking account at a brick-and-mortar bank is 0.05% (as of 12/15/2020)1. On the other hand, digital banks can offer rates that are much higher than traditional banks (check our rates, for example).
To see why this is important, let's assume you deposit $5,000 into a business checking account. For simplicity's sake, your funds remain constant over time. The chart below demonstrates what happens to that $5,000 at a traditional bank with a traditional bank at 0.06% APY versus a digital bank with 0.50% APY.
|1 Month||6 Months||12 Months|
In general, online banks offer much higher rates of return in addition to other perks that we'll explore as well.
Reason #2 – Lower Fees
Low overhead doesn’t just mean better interest rates. It also means lower maintenance fees or even no fees at all. Most conventional banks charge clients monthly fees, minimum balance fees, ATM fees, fees for exceeding cash deposit limits, and even individual transactional fees. While many of these fees are typically less than $10, depending on your business's activity level, those dollars can add up and make a severe dent in your cash reserves.
Online banks, however, are known for their low fees. In fact, the Axos Bank Basic Business Checking account skips monthly fees altogether. There is no average daily balance requirement to avoid fees and it offers free account protection transfers, unlimited fee reimbursements for ATMs within the United States, free image statements, and we’ll even print your first 50 checks—you guessed it—for free!
Online banks are the perfect choice for anyone wishing to cut costs and keep their banking expenses as low as possible. For small business owners, every penny counts. Razor thin profit margins mean that doing your research and choosing a bank with low or zero fees is essential for minimizing your operational expenses and priming your business for success.
Reason #3 – Digital Tools
In addition to better returns and lower fees, online banks come with numerous digital tools to help you conduct your financial activities. Some of these great tools include:
- Image statements. Image statements provide a digital copy of all checks that are deposited into your account per statement period. You can confirm the dollar amount, memos, and signatures written on the actual check to give you peace of mind that every dollar and cent is accounted for.
- Online Bill Pay. With Online Bill Pay, you can take care of all of your expenditures digitally, so you don’t have to deal with a lot of paper receipts and invoices. Since it’s all digital, everything has a paper trail, and you don’t run the risk of misplacing important paperwork.
- Mobile Banking. Mobile banking revolutionizes the way business owners interact with their bank. You can access your accounts, view statements, make transfers, and perform other banking tasks right from your smartphone or tablet. Banking apps typically have multi-factor authorizations, so you know your information is secure.
- Remote Deposit. Having the ability to remotely deposit checks into your business accounts frees up time and resources to focus on other, more critical business initiatives, especially for business owners who are often inundated with day-to-day business operations.
- Merchant Services. Many online banks offer merchant services that facilitate transactions between your business and your customers. Receiving merchant services through your online bank eliminates a significant step in how you process and account for revenue. All of the banking activity happens within your banking institution, so you don't have to deal with third-party services to handle payments or deal with their associated fees.
While most traditional banks offer similar features, these banks will often charge you to perform these tasks. Online banks, however, choose not to charge, thanks to their low overhead costs.
Axos Bank offers remote deposit, image statements, online bill pay, mobile banking, and more. The best part, it’s all free of charge.
Reason #4 – Room for Growth
Digital banks also leave room for growth. Online banks offer a variety of checking accounts to meet your business needs, no matter where you are on your business journey:
- Basic checking accounts. These are your straightforward accounts that keep your money safe and protected. These accounts are good for home-based entrepreneurs and business owners with a low to moderate level of banking activity.
- Interest checking accounts. These accounts work for businesses that are more well-established and may experience increased levels of banking activity. While this increased activity may accrue additional banking fees, the interest earned on your account balance will offset these costs.
- Analyzed checking accounts. An analyzed checking account is meant for businesses that already have multiple accounts in place. These accounts see a very high volume of activity and house large sums of money. They also generate high interest earnings that work to offset greater transaction fees that are incurred from the higher volume of banking activity. All of this activity can be analyzed from a central account.
This kind of scalability is another reason why online banks are an excellent option for growing businesses. As your business moves and evolves, online banks like Axos Bank offer the agility to scale your accounts up or down depending on your business needs.
Set Your Business Up for Prosperity
Business owner objectives vary widely from corporation to corporation, but almost all can agree on a single top priority—saving money. That’s what makes online banks the obvious choice for business owners who want to cut costs and set their businesses up for long-term financial prosperity. No matter the size of your business, or where you are going, Axos Bank offers solutions to help streamline your financial planning and grow your business.
Explore your options on our Small Business Banking Website.
1. “Weekly National Rates and Rate Caps – Weekly Update”, Federal Deposit Insurance Corporation, December 15, 2020. https://www.fdic.gov/regulations/resources/rates/
Why Small Business Owners Love Online Banks
This blog post was published by Axos Bank on May 24, 2019 and last updated on May 20, 2021.