The country’s undaunted entrepreneurial spirit is creating businesspersons in all corners of the nation. With the rise of scores of SMEs and sole proprietorships all over India, there has been a corresponding need in the rise of banking services for small businesses.
Leading banks have responded to this need with good current accounts for business. The following are a few benefits of current accounts for business:
* Maintain a professional air. Companies dealing with vendors do not like to issue cheques to a personal entity. Even though you may be a sole proprietor or have a small business now, a current account in your company’s name immediately lends a professional, business-like air to your dealings.
* Get value-added services from your bank. Banks do not pay interest on the funds lying idle in the current account – there is no such thing as a current account interest rate for this reason. But leading banks offer a variety of value-added services with the current account. A good bank will offer current account features like zero balance accounts, doorstep banking, free Internet banking and mobile alerts, unlimited DDs and pay orders, instant fund transfer using NEFT/RTGS, 24/7 phone and net banking, cash management services, free inward remittances, multi-city withdrawals, etc. Thus, you can bank easily and quickly using a current account for business.
* Improve credit worthiness. Maintaining a current account without defaults on loans or ODs, keeping sufficient balance in the account, and having sound business finances improves your credit worthiness. At times, a potential client or a financial institution might wish to check your company’s credit worthiness before doing business with you. A well-maintained current account with a leading bank helps you in case you are in a business (like export, for example) where you would need to issue a Letter Of Credit to external parties. A good credit score also helps you get loans quite easily.
* Get OD facility. Every company requires an OD (Over Draft) facility at some point or another. The best benefit of a current account is that it offers you an OD facility – you can overdraw the balance in your account for a brief while if you are facing a cash crunch. The OD helps you ‘borrow’ money for a short while, with the bank mostly not charging any interest on the same. This feature of the current account helps when you need to pitch for bigger business or pay off some dues without borrowing a big loan.
* Separate business and personal finance. Many freelance professionals and sole proprietors of companies open a separate current account for business. Though they are not a separate entity from their personal and business accounts, their professional income must be segregated from personal funds. This is critical so that you know the exact state of your business finances, as well as keep separate checks on personal funds. Besides, it helps your accountant keep better track of your business income while filing taxes or making investments on the company’s behalf.