It’s important to have a business bank account for your small business – here’s why

Why should you have a business bank account for your small business?

Well, to start with, you will earn and work better, as well as save more. You will also have the benefits of having an institution that cares and works as fast as you do on call, and newer digital solutions and products to streamline your work.

Entrepreneurs are the lifeblood of South Africa’s economy and with enough support, they will be central to reaching our full potential. Small and medium enterprises represent 98% of businesses and employ more than half of the country’s workforce, but they also carry the most financial risk.

Financing and consultation are key to building bigger, better businesses, says Naledzani Mosomane, head of enterprise development at Standard Bank South Africa. “The Covid-19 pandemic and the recent economic downturn has led to lower demand and cashflow, which means these businesses need as much financial stability as possible.”

Across the country, informal businesses employ over 3 million workers and many still rely almost exclusively on cash to operate, but in times of financial instability, cash is definitely not king and getting banked means businesses can become more secure, profitable and efficient.

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Reasons for getting a business bank account for your small business

Mosomane gives these top four reasons for getting a bank account for your small business:

• The statistics do not lie: you will earn, work and save more when banked. According to the World Bank, formalising business results in, on average, 19% better salaries for workers than in the informal economy. Informal businesses are also only about 25% as productive as their more formal counterparts, meaning they are usually less profitable and generally lack access to finance to build up their capabilities.

“Using a bank account is one of the most important steps in becoming a formalised business and as we said in the past, an account will keep your money safe, let you earn interest on your earnings, make money more accessible and help you work towards your financial goals,” says Mosomane.

• Financing and consultation are key to building bigger, better businesses: In sub-Saharan Africa, 51% of businesses lack access to funding, as credit constraints remain a serious challenge. However, blended finance solutions, such as concessional debt, technical assistance grants and access to equity offer small businesses the opportunity to expand without ultimately bankrupting themselves.

“We understand that enterprises face a myriad of challenges ranging from a lack of access to finance, markets, skills to resources. That is why we are constantly identifying new ways to support businesses beyond just banking,” says Mosomane.

“Therefore, we have been deliberate in building and creating a range of non-banking solutions that aim to strengthen enterprises. You may not know all your options, but through our Enterprise Direct virtual environment, entrepreneurs can consult with a team of business bankers and specialists who understand unique business needs and match them with the right set of solutions.”

• Having an institution that cares and works as fast as you do on call: during the pandemic, SMEs and other smaller entities struggled to survive economically as the world came to terms with lockdowns, shutdowns and hybrid working models. However, many banks across the world announced financial relief measures for small businesses, giving them the breathing room to survive even in a global health crisis.

“At Standard Bank, our top priority was allowing our business clients to manage their financial commitments and honour payments to their employees. We then offered a 3-month moratorium on loan payments, loan extensions, restructurings and payment holidays. It was difficult, but we knew we had to work as fast as our clients do to make sure they were safe,” says Mosomane.

• Newer digital solutions and products to streamline your work: a study by McKinsey on how banks can better serve SMEs, indicated one of the key factors was offering new product innovation and strengthening digital channels.

“Digitization of key SME client journeys” was vital to customer satisfaction and many local banks were noted in the report as having adopted this as a business strategy. More mobile credit options and other sector specific solutions are already helping SMEs and even smaller enterprises to succeed and they are usually only available through financial institutions.

“Our digital enterprise model has virtual capabilities, meaning that regardless of the size, turnover, or location of a client, they are always able to access a direct team of business bankers and specialists who proactively address their needs. Banks across the country are always trying to develop new, innovative digital solutions to ensure South Africa’s economic success,” Mosomane says.