What Is A Business Savings Account & Do You Need One?

Business savings accounts operate similarly to personal savings accounts, but there are several key differences that business owners need to be aware of.

Learn exactly what a business savings account is, how it works, how much it costs, and when you need one for your business.

What Is A Business Savings Account?

A savings account is a separate banking account that acts as a place to hold and store cash for your small business. Business savings accounts are ideal for more long-term business funds, whereas business checking accounts are for everyday funds that you need regular access to.

A business savings account functions quite similarly to personal savings accounts but has more features and reward perks designed specifically for businesses like business software integrations and more.

How Do Business Savings Accounts Work?

A business savings account works by providing business owners a place to store funds. You can deposit cash or transfer funds into your savings account, where you can then:

• Withdraw cash as needed
• Transfer money out as needed
• Keep your business finances organized & separate from personal savings
• Potentially organize savings into subaccounts
• Potentially gain interest on your savings balance

Business Savings Accounts VS High-Yield Savings Accounts

Both savings accounts and high-yield savings accounts allow business owners to store money — the key difference is that high-yield savings accounts offer significantly higher APY rates, allowing business owners to earn more interest on their savings funds.

Many of the best high-yield savings accounts offer 3.0%-4.0% APY. Some HYSAs offer unlimited APY, while others have savings balance limits on APY earnings.

How Much Does A Business Savings Account Cost?

Business savings accounts can vary from $0-$35/month. Most business savings accounts offer the option to waive monthly fees based on certain criteria like minimum savings balance and/or minimum monthly deposits. Some also waive fees if you use the company’s checking account and savings account together.

While $0-$35/month is the general range for most business savings accounts, you may occasionally see a higher fee than this — usually for banks that are offering a very specific set of additional features. You’ll want to make sure that the features you get are worth the price for your business. You’ll also want to check for additional savings account fees like:

• Overdraft fees
• Non-sufficient fund fees
• Wire transfer fees
• ACH fees
• Stop payment fees
• Foreign transaction fees
• Inactive account fees

The Benefits Of A Business Savings Account

A business savings account makes managing and organizing your finances much easier, but there are other perks to a business savings account as well, including:

• Potential to earn APY on savings balances
• FDIC-insurance to protect savings
• Greater legal protection than using a personal savings account
• Ability to store emergency savings, cash reserves, or save for bigger business purchases
• Separating personal and business expenses
• Easier to make financial reports and track expenses
• Potential to organize savings into subaccounts to save for specific goals
• Can improve ability to qualify for corporate cards and small business loans that require a certain cash on balance to qualify

When Do You Need A Business Savings Account?

Some smaller businesses may be able to get away with only having a business checking account, but instead of asking why you should have a business savings account, try asking: why not have a business savings account?

With so many business savings accounts with $0 monthly fees, there’s no real reason not to have the extra liability protection and financial organization benefits of a savings account.

Even if your business doesn’t have established savings yet, opening a savings account and watching that account balance slowly increase can be a great motivator to build your business’s emergency fund or save for a specific goal, like expanding your business or buying an expensive new piece of equipment.

How To Open A Business Savings Account

To open a business savings account, compare the best small business savings accounts. Then, find the option that gives you the features, rewards, and fees that work best for your business.

Once you’ve decided on the right option, you will most often be able to complete a business bank application online.

What Do I Need To Open A Business Savings Account?

Once you decide on the right business bank account for your business, you will need to gather some documents to set up your account.

Here’s a basic checklist of what is needed to open a business savings account:

• Employer Identification Number (EIN)
• Business Formation, Partnership, or Incorporation Documentation
• Business License
• Government-Issued Identification

Also, be sure to check with your specific bank to see if there are any other documents or eligibility requirements to prepare for.

Read our full article on how to open a business bank account to learn the ins and outs of the application process.

How much money should a business have in savings?

Shelli is the Finance Director of Merchant Maverick and has provided expert advice and guidance on all financial matters for the company since 2020. She has over 20 years of finance and accounting management experience covering a broad range of industries. Her prior role in public accounting focused on providing advice to small and medium-sized businesses. She holds a Master of Science in Taxation from Golden Gate University and is an Enrolled Agent.

Shelli WoodwardMerchant Maverick's Finance Director/CPA

There is no set formula for how much a business should have in savings, although most professionals recommend having enough to cover operating expenses for 3-6 months. Every business should have at least one month of operating expenses saved. The specific circumstances of your business will determine how much additional savings is needed for you. You should consider things such as your revenue model (how quickly money comes in), how predictable your revenue is, do you have large cash needs periodically through the year (like inventory that is purchased once a year), and is your business impacted by seasonality.

We hope this was helpful and that you feel more confident and comfortable managing your business’s savings!