Use separate banks for Property and Small Business accounts?

Hi everyone,

We are about to set up a small business bank account.

If my current bank was offering good rates/low fees for business accounts, is it safe to use them? Or should I be keeping the banks separate?

Thank you in advance.

 

I would advise to use separate banks. If the business goes bad the bank will know.

 

Business should always be separate

 

Separate your business account bank from your personal bank,

 

Why would you change institutions between your business banking & personal banking?
Would this only be in a situation where most of your income was derived through the business?

e.g.

I have business banking (company) with Bank A (however I don't currently draw any personal income from it).
I do most of my personal (transactional) banking with Bank A.
I have all lending through Bank B (and only personal banking is offset account).

 

definitely use the one lender for all - negotiate no cross collateralisation or "all monies" clauses... imho it's best way to obtain better pricing across all products, not just lending (transactional/merchant/fx etc). they'll also have better line of sight into your business, typically giving more comfort (flexibility) and less covenants.

 

yes the bank algorithms will identify cash flow deficiencies before you do... why's that an issue? it'll prompt one of their cash flow specialists to talk to you about your options before it's a problem.

the only reason to consider split banking in my opinion is if you have a very capital extensive business eg: if you need for expensive equipment it can cause leverage issues and see you needing to "spread the risk" across a few lenders.

 

4 reasons mainly

1. clauses in account contracts and loan contracts allow the bank to take debts from any account you have with them

2. Security. Similar with security held by the bank such as mortgages over real property. Even though the bank may not have a mortgage over a property in relation for that particular account you would have given them an equitable mortgage over it, so they could take a property for any debt owed.

3. Ability to get finance.

If going through a cash flow crisis you might want to increase loans, but this may not be possible if the lender can see your business struggling.

4. Sacrificing segments
Where the debt is compartmentalised at different lenders you could sacrifice one particular property. For example you could pay on time for 3 out of 4 loans and give up on the 4th - or better, apply for a repayment holiday on this one.

5. Preserve credit report
Where ownership of loans and accounts are different you could even concentrate on paying one person's loans and sacrifice the others person's. This can help in recovery going forward.

 

Thanks everyone.

It seems obvious from all the comments to keep it separate. So great to tap into such a knowledgeable community.

Thanks again.