How to open a business savings account in Canada?

Selecting a savings account, the officer has to analyze a lot of parameters of savings products. It is also very important to choose a stable financial organization. What of a many of banks and credit unions to select? What are the claims to managers and legal entities to open a business deposit? Bankchart.ca in this article will assist you to make the most profitable choice.

Summary

  1. Step 1. What is a commercial savings account? What are the kinds of the accounts in Canada?
  2. Step 2. How to compare commercial savings accounts?
  3. Step 3. Features of servicing of commercial savings account
  4. Step 4. How to open a business savings account in Canada (online)?
  5. Findings

Probably each manager does the best to make bigger the revenues of his firm. There are many methods of doing this, but surely the easiest one is to open a commercial deposit account. At first sign, it is simpler to do than, to enhance labor productivity, design a new commodity, create interesting advertising, but it isn’t as easy as it sounds. Selecting a savings account, the officer has to analyze a lot of parameters of savings products, like administrative fees, restrictions to the operations, the level of percentage rates, the minimum balance, the interest payment frequency, early exit commission, access to Internet banking software and others. It is also very important to choose a stable financial organization. What of a many of banks and credit unions to select? Should it be a bank from the biggest companies, for example, Scotiabank, TD Bank, BMO, RBC or another one? What are the claims to managers and legal entities to open a business deposit? What data to provide? Bankchart.ca in this article will assist you to make the most profitable choice.

Step 1. What is a commercial savings account? What are the kinds of the accounts in Canada?

A business savings account allows corporates, small businesses and entrepreneurs to receive percentage incomes on additional funds. In Canada it is usually linked with a company’s current account and its managers can free transfer money from the savings account to the day-to-day one without fees and penalties.

Canadian banks and credit unions often establish higher minimum balances for such accounts. The balances size can be many sets and depend on the level of the deposit interest rate. Business savings accounts can’t be opened by a private person, but only entrepreneurs and legal entities. Unlike personal business savings accounts, commercial ones can be more expensive and are operated by several people at the same time.

In Canada a firm can open such types of business savings accounts:

  • Term deposits – offer a placing of a particular amount of money for a particular fixed term. If the company withdraws the funds before the expiration date, the financial organization will charge a fine from the interest revenue. Banks and credit unions can offer such frequency of interest payment: yearly, semi-annually, quarterly, monthly, at the end of maturity and offer a replenishment function. According to our investigation, the size of percentage rates on term deposits varies from 0.05% to 3,05% and depends on the bank, the balance requirements (the greater it is, the larger is the interest) and the frequency of percentage payment (the more frequently you get the interest income, the lower is the rate)
  • Business guaranteed investment certificates – is a type of securities for companies, offering a company similar to term deposit conditions. They can be issued for the term from 1 day to 7 years and be both redeemable and non-redeemable with a fixed or variable interest rate
  • Savings account – offer flexibility and access to the invested funds at any time, but as a rule, they have lower percentage rates comparing to the term deposits and GICs. By our research, the rates can vary from 0% to 1,7% yearly. Such accounts are usually linked with a current business account.

Canadian banks and credit unions can offer more significant interest rates if the small business fit some requirements, like keeping a particular balance on the deposit or making no withdrawals during a month. CAD and USD are the most popular currencies for business savings in Canada.

After opening a business savings account your firm receives the following advantages:

  1. Your firm will get a greater percentage revenue comparing to transactions accounts
  2. Cheap or zero administrative and transaction fees
  3. Financial organizations often propose higher interest rates if the firm fits some requirements
  4. You can choose different terms and interest payment periods
  5. Easy access to the invested funds
  6. Business deposits motivate to save up money for assets purchases and force majeure
  7. It will be easier to get a business loan in the future
  8. Canadian authorities (CDIC) provide security of business investments in deposits for sums till 100 000 CAD

But savings accounts also have disadvantages:

  1. Canadian banks and credit unions can establish limitations to the minimum balances on savings accounts
  2. You must pay taxes from the interest incomes
  3. Commissions can be set on some transactions, like withdrawals

Step 2. How to compare commercial savings accounts?

When selecting a business savings account, the authorized staff should consider such important price and non-price parameters of the product, like:

1)    Flexibility – the option of making free withdrawals and replenishment without any fines or additional commissions can be rather useful for your business

2)    The level of percentage rates – by our investigation Canadian banks and credit unions pay remuneration on the invested funds from 0% to 3% annually. The size of interest rates depends on the ease and flexibility to the access to the invested funds, the size of the deposited sum and the interest payment frequency

3)    Servicing fees – Canadian banks and credit unions seldom charge periodic administrative commissions. But fees for making withdrawals at tills or ATMs can increase your costs greatly. In accordance with our investigation, the level of such tariffs can range from 0,5 to 8 CAD per operation

4)    Interest frequency payment – your firm can choose a monthly, quarterly, half-yearly, annual or at the maturity frequency of incomes payment

5)    Requisitions to the minimum sum – often are set by Canadian banks and credit unions and their size can vary from 0,01 to 15 000 000 CAD. Some savings accounts have several requirements to minimum balance for one account

6)    Restrictions to sums operations – financial organizations often set limits to the size of operations, for example, the limit to the sum of withdrawals at ATMs

7) Early exit commission – can be established for term deposits and GICs, while for savings accounts financial organizations usually don't charge such a commission

8) Access to Internet banking – the possibility to manage funds by Internet banking makes the account using simple

The mentioned above parameters are different for term deposits, GICs and savings accounts. What is good for one type of savings accounts can a restriction for another one. So, the director should consider which kind of savings account fits your goals. Term deposits and GICs suits for long-term investment purposes, like buying equipment or estate. Savings accounts will fit your small business more if your firm has a short-date excess of money, for example, before the payment of the salary, so you can earn additional interest revenue.

Step 3. Features of servicing of commercial savings account

Selecting the account the authorized managers should take into the account the following options:

  • Taxation – you must pay taxes on the interest incomes
  • Commercial savings accounts cannot be used for individual purposes
  • Multiuser access – business deposits accounts can support management access for several authorized managers simultaneously
  • The number and the locations of ATMs and branches– does the financial organization has enough departments and cash machines near the location of the company and its staff
  • The Internet banking software – does the program can be connected with your book-keeping program? Does the bank provide a mobile application?
  • Additional privileges – does the bank or credit union offer economic reviews, useful webinars or discounts from partners on antivirus or accounting software

Step 4. How to open a business savings account in Canada (online)?

To open a commercial saving account, both owners and a company must match financial institution requirements, for example:

-          The manager/owners:

  1. To be a citizen of Canada
  2. To be 18 years old

-          The firm:

  1. To be a resident of Canada
  2. To have a day-to-day account in the financial organization

If you fit these conditions, the authorized staff can fill the form online or in the financial organization’s department. The first way fits more for the companies, which has already a current account at the bank or the credit union, and the second method for new clients.

After that, the holders and the firm must go through the identification and give the bank’s or the credit union's officer such documents and information:

- The director/owners:

  1. Canadian passport
  2. social insurance card
  3. birth certificate
  4. driver’s license

-          The company:

  1. the firm’s address
  2. the Canadian Business Number
  3. the certificate of registration of the company
  4. Certificate of Compliance
  5. Notice of Assessment for Income Tax
  6. Company's Annual Report for the last fiscal year
  7. other essential information, like licenses, trademarks etc.

The list of the documents can differ and depend on the client legal form (sole proprietorship, partnership, corporation or unincorporated association) and the presence of the current account in the bank/credit union.

After opening the business deposit (online) the firm must transfer the minimal account with bye Internet software. So, a small company can employ bigger percentage rates and get extra interest incomes.

Findings

Before selecting a commercial deposit account it is essential to determine the purpose of the investments and the desired conditions: term, sum, required flexibility, the interest payment frequency, etc. It will assist you to define the kind of the deposit (term, savings account, GICs) and its parameters.

To select the best commercial deposit, the authorized staff should take into account such parameters: flexibility, the level of percentage rates, servicing fees, interest frequency payment, requisitions to the minimum sum, restrictions to sum operations, early exit commission, access to Internet banking and others.

Besides, the responsible officer should consider the following conditions to select the best commercial deposit: multiple access to Internet banking, the number, and the locations of branches and ATMs, the presence of mobile banking applications, bonuses from partners, etc.

To open a business deposit both managers and company are to fill the application, pass the authentication and provide additional data and documents.

 

 

 

 


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