Many new business owners struggle with small business banking key terms. Banks and financial institutions typically use terminology that most people are unfamiliar with. However, it is very important for small business owners to understand all of the terms from small business banks fully before carrying out their small business banking.

Small businesses carry out several different types of small business banking. They write checks with checking accounts, save money with savings accounts, and borrow money with small business loans. Each type of transaction has its own set of terms. When thinking about how you can better educate yourself on small banking key terms, consider the following:

1. Small business owners typically handle their own banking for small business needs.

2. Small business owners keep their own small business banking records.

3. Small business banking terms are crucial to banking contracts.

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Understand small business banking key terms for loans

Loans help begin small businesses and expand them. It is very important to understand all of the terms used in the wording of your small business banking loans. Many business owners sign a promissory note, which is a contract promising to repay the amount borrowed at a given time and under certain conditions. The promissory note may be secured or unsecured. Secured notes give the lender something to take if the borrower does not repay the note. In unsecured notes, the lender examines the borrower's cash flow and profits of business for repayment.

I recommend: Look for more banking terms and small business banking information at AllBusiness. Gain access to loan key terms for small business banking services at Business Town.

Discover terms associated with small business banking accounts

Small business owners have small business banking accounts. These accounts also have a set of terminology tied to them. An account is credit established under a certain name. One usually establishes the account through depositing funds. Accounts have account activity, which is any activity that occurs with the account. This includes deposits, debits, finance charges, and new balance. The term insufficient funds means that the account balance is not enough to cover the amount of the check that you have written.

I recommend: Get more terms and information about small business banking and small business banking service at Buz Gate. View a banker's glossary at American Banker.

Learn terms that describe your small business banking status

Some terms that you may hear that describe you and your business are assets, debt, equity, liabilities, net worth, and economic activity. Net worth describes the business assets minus the liabilities. Bankers want to know about your business and financial means before loaning you money or investing in your work. Your assets contribute to the well-being of your business. Debt is the money that you owe in the form of a loan. Equity is the money that you or someone has invested in the business. Economic activity is the making and distributing of services or goods by the business.

I recommend: View business banking terms as defined by Bank of America for best business banking. Gain access to basic banking for small businesses terms from Virtual Business Incubator.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  When looking over any contract or legal document about banking services for small businesses given to you by your financial institution, be certain to check for key term understanding. If you are uncertain about any terms listed in the document, consider taking it to your lawyer for review.

A first step to establishing your small business is setting up a business bank account. Many new and part-time small business owners are guilty of using their personal checking account to handle transactions. But that just won't cut it for a variety of reasons and can make tracking money confusing, especially at tax time or if you are audited.

Self-employed sole proprietors are frequently guilty of not having business bank accounts. But if you want to take advantage of the tax breaks that business ownership offers, and protect yourself from personal business liabilities, separating your finances is one important step.

The type of account you need depends on various factors, including the size of your business and whether you are a non-profit, sole proprietor, LLC or corporation. Here are three key reasons you can benefit from having a business bank account:

1. Deducting business expenses. A personal account makes it harder to justify to the government that your business is legit if it could be mistaken for a hobby. It is also easier to miss deductions if your expenses are commingled with your personal transactions.
2. It simplifies your record keeping and life, by managing cash flow separately from your personal accounts.
3. It makes your business look more professional to clients by having checks with your business' name on it, for instance.

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Shop around

With so much competition, banks are throwing out incentives to lure small business owners, including free checking accounts and even cash payments of $50 or more just to open a business account. Fees and services vary by bank, so you may need to ask some questions.

I recommend: Surf the Web to save leg work when looking for the best bank for your buck. Bank of America, Wells Fargo, and Washington Mutual are just a few of the biggies who cater to small business. For online-only banking, NetBank offers small business accounts and services.

What's required

The information you need to open a business bank account includes basics such as your business name, a DBA ('doing business as' name) social security number and other details. One major piece of information you will need that personal accounts don't require is a government-generated employer identification number (EIN), also called a tax identification number (TIN).

I recommend: Many banks, such as Wachovia, will list online what they require to open an account. You can obtain an EIN by completing an online application from the IRS, or by calling their toll-free Business and Specialty Tax Line at (800) 829-4933.

Don't forget plastic

The world runs on plastic. Having a separate credit card for your business is often required to handle online transactions, and it makes it easier to keep track of purchases.

I recommend: Bank of America, Citibank and others offer a variety of credit-card options for small businesses that are at varying levels of size and income. American Express is another popular choice because you can accrue Membership Reward points and airline miles, and Amex categorizes all of your purchases in a year-end statement. Just watch for fees!

Tips & Tactics

Helpful advice for making the most of this Guide

• •  When considering bank fees remember they are partly tax deductible as a business expense.
• •  Opening an account early on in your business can help establish relationships needed for future financing.
• •  Look for banking extras such as online banking, payroll and tax services, and discounted employee banking. Try a VISA check card. You may need one in case you need to build credit to obtain a credit card.

Take the time to learn about small business basics so you can make the right choice for your professional needs. Find out what types of services are available to you as a small business owner. Look for banks offering small business accounts like checking, savings and payroll accounts. Learn about the loan options available and how you can qualify for those opportunities.

Recognize that many small business banks specialize in niche services. When you're considering a small business bank, take the time to evaluate your professional needs and the niche market such banks cater to in order to determine if that's the best solution for your business. For example, those in the construction industry need more emphasis on short term and bridge loans while those in the recruiting industry need more focus on payroll accounts.

1. Learn the options available to you when considering banking for small business.

2. Search out business reward programs in small business banks.

3. Look for the best business banking products and small business banking services.

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Gather small business banking information to help you make the best choices

Take advantage of the opinions given by financial planners and other experts. Read up on small business banking and their standards and policies so you can make side-by-side comparisons in order to make the best decision for your business.

I recommend: Financial Institutions Consulting breaks down six innovations critical to small business banking. Bankrate.com provides the basics on how to choose the proper financial institute for your small business banking needs.

Look for reward systems to benefit your business

Actively search for reward systems or bonus programs when searching for a small business bank for your business. Many banks offer rewards or bonus points when your business card is used to make purchases. Such programs can help you scale back on things like travel expenses or office equipment.

I recommend: Bank Systems & Technology explains why small business banks are turning toward reward systems to attract business. BAI provides you with the information you need to evaluate reward systems.

Find information on the top small business banks

Actively search out the top small business banks and find out what makes them stand out from the crowd. Make it a policy to continue to find the top small business banks so you know you're keeping your money in the best financial institute for your professional needs.

I recommend: Entrepreneur.com lists what they consider to be the best small business banks for entrepreneurs. Knowledge Institute breaks down the various types of services small business banking offers to help you make the right selection in financial institutions.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Discuss with your accountant the reasons to use -- or avoid -- banking with your personal bank for your small business banking needs so you can make the best decision for you personally as well as professionally.

Small business banks provide a huge service to our economy as a whole. By providing lending services to start-up companies, they create the capital that allows those businesses to hire employees, which creates jobs and in theory grows the economy.

So if you are an owner of a small business, it's imperative that you take a little time to learn about the basics of small banking and accounting as well as what relationship you might expect from a small business bank. Here are some places where you can further your education and links to further resources to help you get started.

1. Attend courses or obtain a degree that can be utilized in banking for small business.

2. Go to conferences and seminars where small business banks will give insights on how to maximize your business.

3. Browse small business banking services to locate the best business banking model for your company.

Action Steps
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Enroll in college courses that cover small business banking

There are many colleges which offer degrees in accounting, accounting with a banking focus and the business of banking. Obtain a degree or enroll in a few select collegiate level courses and then apply your knowledge to the operation of your business.

I recommend: Check out the Smith Hutson Endowed Chair of Banking for more information on their banking degrees. The Pennsylvania College of Technology also offers courses in accounting with a concentration on business banking.

Take seminars in business banking as part of your small business banking education and training

Many banks catering to small businesses, or banks offering small business accounts, host seminars in which they educate business owners how to maximize their leverage and grow their business. Attend some of these seminars and get small business banking information so that you can apply it to your business.

I recommend: Visit the website for HSBC for more information on the seminars focusing on small business banking that the company holds in association with the US Small Business Administration around the country. Also, Source Media Conferences has a yearly small business banking conference.

Learn about small business banking services that various banks offer

Many banks have a small business division with products and services geared directly toward a small business customer. Many of these websites also offer tutorials and further explanations on how their services can be incorporated into your business. Take some time to learn about various banking services for small businesses so that you can maximize your relationship with a lender and grow your business.

I recommend: Visit the website for Wells Fargo for further information on the small business banking services that are offered. Bank of America also offers further information on the small business solutions that the company provides.