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When opening a business bank account, avoid these mistakes
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Mixing business transactions with personal transactions can be messy and so deciding to apply for a Current Account is a prudent thing to do. While most Current Accounts come with the same basic features and requirements, there are certain mistakes you should avoid when opening a business Current Account. Here are some of them.
1. Not considering the minimum balance requirement
A minimum Average Quarterly Balance (AQB) requirement is one of those crucial Current Account requirements that you should consider well. Every Current Account comes with an AQB requirement, and this can range from Rs. 10,000 to Rs. 2,50,000 lakh and higher. The higher the AQB you opt for, the more features and benefits that will be provided to you by the bank. However, you should weigh your options carefully because it is not necessary that those additional features will be of much use to your business. Hence, you should not unnecessarily tie up your working capital by choosing a high AQB business Current Account.
2. Missing out on proper documentation
When you apply for a Current Account, you will need to submit a set of required Current Account documents just as when you open a savings account. However, the documents required in this case will go beyond your identity and address proof as this is a business Current Account.
Therefore, documents relating to your business such as a license or registration document, articles of association, GST registration certificate, etc., may be required to prove the existence of your business. Providing the right documents when you apply for a Current Account is crucial not only to set up your business Current Account but also for future banking transactions with various stakeholders.
3. Selecting a bank for the short-term
When you apply for a Current Account with a bank, you should approach this with the long term in mind. That is because as your business grows and expands, your needs, including funding, credibility letters, and more will also increase and your bank will be able to assist you with this. In fact, maintaining a good long-term relationship with your bank would prove to be very beneficial, as banks tend to provide value-added services, discounts, and special features for long-standing customers.
Therefore, even if you only have basic Current Account requirements today, in the future your business may need a lot more banking support. Hence, you should carefully consider which bank you want to opt for when you apply for a Current Account.
Additional Read - Why Business Owners Must Open a Current Account?
4. Not understanding or making use of all the features
A business Current Account comes with many features that are designed keeping in mind the banking needs of businesses. Therefore, if you simply think of a Current Account as a savings account but for your business, you are likely to miss out on these additional features, which could really help your business function smoothly. For instance, Current Accounts come with an overdraft facility that allows you to draw on more funds than the available balance in your Current Account. This can come in handy when you are short on working capital and are awaiting payments from your clients.
It is also best to ask questions and gain clarity on any doubts you may have regarding the business Current Account by reaching out to the bank’s customer service or Current Account manager. So, do not delay this important business milestone any further and open a Current Account with us today!
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