How To Switch Business Bank Accounts (2024 Guide)

Reasons for Switching Business Bank Accounts

You may decide to change the banking institution for your small business for many different reasons.

1. Fees are too high: Monthly maintenance fees or hidden charges can affect your profit margin. If they’re too high, you may want to look for a fee-free account.
2. Poor customer service: A bank’s customer service doesn’t matter too much when things go well. But when you run into problems and you can’t get a human to help you, it can be a dealbreaker.
3. Restrictive minimums: Some banks limit the deposits or withdrawals you can make per day or the number of monthly transactions. As your small business grows, these factors may become too limiting for your operational needs.
4. Lack of a physical location: Banks have closed thousands of physical locations across the country over the last few years. If you rely on face-to-face interactions or cash deposits, an ATM may not cut it.
5. Your bank doesn’t offer the services you need: If your bank doesn’t offer the products or services you need (business loans, extra business debit cards for team members, etc.), it may warrant changing banks to get a one-stop shop for your financial accounts.
6. Higher APYs are available: If your bank is still offering an annual percentage yield (APY) on your business savings account that starts with a zero, it may be worth checking to see if you can get a better interest rate on your business reserves.

>> Related: Learn more about how to switch banks

Pros and Cons of Switching Business Bank Accounts

Whether changing banks is right for your business comes down to a cost-benefit analysis. Does the time and hassle of switching outweigh the pain points you’re currently dealing with?

Here are some of the potential advantages and drawbacks of changing business bank accounts to consider.

Pros

Save money by lowering fees

Get new or improved features

Have a convenient location for in-person transactions

Improved customer service

Cons

Tracking down documents and people to sign them can be tedious

Changing all suppliers, employees, etc. to the new account can be a hassle

May disrupt your automatic payments if you do not change the information correctly

Waiting for new credit or debit cards to arrive can be time-consuming

Preparing to Switch

Switching small business checking accounts shouldn’t be a hasty decision. Because so many incoming and outgoing payments are attached to your account, you’ll need to prepare for this change well in advance to ensure a smooth transition.

Research Your Options

Changing your bank account can be a time-consuming task. Researching your options can ensure that you only make the switch once, and don’t have to change again a few months down the road because your new bank lacks the features you need.

Start your research by making a list of the business needs you require from your bank. These could include the following:

• Business checking and savings accounts 
• Credit cards 
• Integration with accounting software or payroll 
• Merchant services 
• Online bill payments 
• Cash deposits 

Check the fee schedule of potential banks so you know how much you’ll be paying for these features and services.

Compare several banks and their offerings, and make note of which ones get closest to your ideal set of criteria. You’ll want to check that your bank is insured by the Federal Deposit Insurance Corporation (FDIC) or by the National Credit Union Administration (NCUA) if you go with a credit union, so your money is protected in the unlikely event the bank goes under. 

>> Related: Learn more about the best checking accounts

Prepare the Necessary Documents

Before you apply for a new business bank account, gather the necessary documentation you’ll need. The list of documents and information you need can vary based on the structure of your small business, but they can include the following:

• Government-issued identification (some banks require two forms)
• Business name (and DBA if applicable), address and phone number
• Business licenses
• Financial statements
• Employer identification number (or Social Security Number, if you’re a sole proprietorship)
• Name(s), phone numbers, birth dates, emails and mailing addresses of account owners
• Articles of incorporation (if you have an LLC or S-corp)
• Date your business was formed
• The industry in which your business operates (businesses in industries like gambling, cannabis or adult entertainment may not be eligible for a business bank account)

Collecting these documents beforehand will streamline the application process, especially if you plan to have multiple parties on the business bank account.

Steps for Switching Business Bank Accounts

Once you’ve gathered the appropriate documents above, you’re ready to switch small business checking accounts. Here’s how to do it:

1. Apply for your new account: If you’re in a partnership or corporation, include all relevant parties to sign the application. Most banks allow you to do this online, but if you have multiple people on the account, it may be easier to do it in a physical branch.
2. Fund your account: Most banks allow you to deposit initial funds via an ACH transfer with your previous bank. (This is a good opportunity to test transferring funds to the new account.) If this doesn’t work, you may be able to use a check instead. Make sure the amount is sufficient for your new bank’s minimum deposit requirements.
3. Set up mobile and online banking: Download the bank’s app and set up your username and password with the online banking portal. Save your password to your online password manager. Enable two-factor authentication for additional security.
4. Transfer business transactions to your new account: Ask your new bank if they have a “switch kit,” which is a handy checklist of all the accounts you need to transfer and to-do tasks so you don’t forget anything. Be sure to cover the following:
   • Payroll/electronic deposits for employees
   • Automatic payments or recurring payments to suppliers, software providers, lenders, etc.
   • Automatic customer invoices
   • Merchant services processors
   • Payments to partners or consultants
5. Keep your old account open for a while with a decent account balance in it: This allows any pending payments to clear before you close the account, saving you costly overdraft fees.
6. Close your old account: Follow your bank’s procedure for closing your old account. Find out how you can receive any outstanding funds after the account is closed.

>> Related: Learn more about how to transfer money between banks

Tips for a Smooth Transition 

Timing is important for a smooth transition to your new bank. If possible, plan to make the switch date just after payroll clears, which will give you several business days to work out the kinks before employees’ paychecks could potentially be affected by any snags.

Also, check your old account for any automatic payments you may have missed. Remember to go back 12 months to check for bills (such as insurance or subscriptions) that post annually. 

Communication is key in the transition from the old bank to your new one. Keep the customer service numbers of both institutions handy, in case you need assistance.

>> Related: Learn more about the best apps to manage subscriptions

The Bottom Line

Switching business checking accounts can be a simple process — it just takes time and care to transfer all the information and automatic payments from your old account to the new one. Careful research will reveal which bank is the best partner for your business based on its features and banking services. 

With good preparation, you can make a seamless switch between banks so your cash flow is uninterrupted.

FAQ: How To Switch Business Bank Accounts

Can I switch business bank accounts online?

Yes. Most banks have put their application process online. However, if several people need to sign as owners of the new business bank account, it may be easier to open the new account in person.

How long does it take to switch business bank accounts?

Once you’ve gathered the appropriate documents, opening the new account could take less than an hour. You should, however, keep your old business checking account open and funded for a few months to allow any outstanding payments to be posted.

Will switching bank accounts affect my business’s credit score?

No. Like your personal credit score, your business credit score is affected by factors such as your track record of on-time payments, how many loans you’ve taken out recently and related information. Simply changing who you bank with will not affect your business credit score.

Editor’s Note: Before making significant financial decisions, consider reviewing your options with someone you trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.