Business Banking

Part
01
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Part
01

Businesses Headquartered in South Dakota

The US Small Business Administration defines small businesses as companies with fewer than 100 employees. According to a report by this administration, in 2018, there were 85,252 small businesses in South Dakota employing 209,694 people. The finance and insurance industry which includes banking, employs 9,164 people in South Dakota. However, this report does not indicate how may of these businesses specifically have headquarters in the state. Based on data provided by Hoovers, the number of small, medium, and large businesses headquartered in South Dakota are 1,279, 270, and 39 respectively.

METHODOLOGY

Since the US U.S. Bureau of Labor is responsible for measuring and providing data on working and labor conditions, our first strategy involved scouring the organization's website. There, we located a data search tool which allowed us to find the number of employees in South Dakota and the amount earned by these employees by industry. While these statistics were somewhat helpful in understanding South Dakota economic and labor trends, they did not directly answer the question.

We continued our research by examining a variety of press releases and news reports. Forbes provided a list of the largest companies in South Dakota. However, Forbes only listed the companies by total revenue. After thoroughly looking at a few of these companies such as Black Hills Corporation, we found that sales in South Dakota only accounted for a small portion of their revenue. Other reports were published by Zippia and Business News Daily but they only offered a list of the top companies in South Dakota. There was no indication of whether or not these companies are actually headquartered in the state neither did they offer a full list of businesses by size.

Next, we consulted other government sources including American Fact Finder by the US Census Bureau and South Dakota's Office of Economic Development. American FactFinder provided data from the 2015 census in the US. Not only was this data old, we were only able to find the number of businesses in South Dakota with a payroll. As a last resort, we turned to a third party database, Hoovers. This platform provided a breakdown of businesses in South Dakota by size.

BUSINESSES IN SOUTH DAKOTA

As stated by the US Small Business Administration , mid-size or medium companies have between 100 to 999 employees while large businesses have more than 1,000 employees. Based on data provided on Hoovers, there are 1,279 small businesses (defined as businesses with less than 100 employees), 370 medium or mid-size businesses (100-999 employees), and 39 large businesses headquartered in South Dakota.

By employees, the breakdown of businesses headquartered in South Dakota is as follows:
  • Number of businesses with less than 4 employees: 133
  • Number of businesses with between 5 to 10 employees: 261
  • Number of businesses with between 11 to 49 employees: 629
  • Number of businesses with between 50 to 99 employees: 256
  • Number of businesses with between 100 to 499 employees: 323
  • Number of businesses with between 500 to 999 employees: 47
  • Number of businesses with between 1,000 to 4,999 employees: 33
  • Number of businesses with over 5,000 employees: 6

By revenue, the breakdown of businesses headquartered in South Dakota is as follows:
  • Number of businesses with a total annual revenue of less than $1 million: 329
    • Number of businesses with a total annual revenue of between $1 million to $5 million: 535
    • Number of businesses with a total annual revenue of between $5 million to $10 million: 192
    • Number of businesses with a total annual revenue of between $10 million to $50 million: 255
    • Number of businesses with a total annual revenue of between $50 million to $500 million: 136
    • Number of businesses with a total annual revenue of between $500 million to $1 billion: 10
    • Number of businesses with a total annual revenue of between $1 billion to $10 billion: 5
    • Number of businesses with a total annual revenue of over $10 billion: 3

    BUSINESS BANKING IN SOUTH DAKOTA

    There are 435 banks and financial groups in South Dakota, most of which offer business banking services. The largest banks offering business services in the state are First PREMIER Bank with 2,093 employees in South Dakota and Great Western Bank with 1,568 employees. According to South Dakota's Office of Economic development, financial services - which includes business banking, is a key industry in the state. The industry makes up 15% of South Dakota's economy. It also saw a 10.3% growth from 2003 to 2013. The average wage of financial services jobs in South Dakota is $28.04 per hour.
    Part
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    Part
    02

    Business and Personal Banking Comparison

    At first glance, it might appear that there are no real differences between personal bank accounts and business bank accounts. A cursory look at the situation might even suggest that having a business bank account for a small business is less than advantageous for the business owner. However, after careful consideration, there are numerous advantages for small business owners when it comes to using a business banking account.

    What is Business Banking?

    In the past, banks were required to keep business and personal banking services in physically separate locations. This legal requirement was done away with in 1999, and now banks may offer all of their services under one roof. Banking services aimed at individual consumers are most commonly referred to as retail banking. Business banks are also known as corporate or commercial banks, and the terms are frequently used interchangeably. Business banking focuses specifically on businesses and their needs, from sole proprietors to large corporations.

    What Sets a Business bank account apart from a Personal Account?

    Business bank accounts often include several financial and advisory services that are imperative to a business and do not come with a standard personal bank account. These services can include deposit accounts, non-interest-bearing products, commercial loans, and credit card and merchant services. Additionally, having a business account enhances the image of professionalism. This professionalism is readily apparent by a business name on any checks that are written by or to the business, as well as by allowing the customer to pay via credit card.

    Utilizing a business bank account allows a small business to have accurate and clean bookkeeping. This is paramount at tax time and makes it easy to hand off the accounts to an accountant. These accounts lend proof that the business is not a hobby and reduce the chance of a company being audited. The IRS requires a separate business account for any incorporated business, including sole proprietorships.

    Service with typical business account

    Aside from the expected business checking and savings accounts, business banks offer cash management solutions along with various financing options. Banks might also provide securities underwriters and asset management resources for corporate and business clients. For businesses to expand, financing is essential. Operating expenses, acquisitions, and equipment can all require additional capital. Business banks offer fixed-term loans, short- and long-term loans, and asset-based loans. Business banking usually comes with options for a line of credit for the company. This credit can be used for emergencies and equipment purchases. Some banks will even provide equipment leasing plans.

    Cash management services (also known as treasury management) assist businesses in being efficient in managing their payables, receivables, and liquidity. Business bank accounts have specific processes already in place that help busineses streamline their cash management. This ultimately results in lower costs and more cash on hand. To accelerate money transfers and better manage funds, business banks also provide access to Automated Clearing House (ACH) and electronic payment processing systems. Money sitting idle in checking accounts can automatically be moved into interest-bearing savings accounts to put surplus cash to best use. In addition to the above, business banking accounts allow for the authorization of employees to handle day-to-day banking needs on behalf of the business.

    Important factors to consider

    There are many factors to consider when it comes to choosing a business bank and account. This is especially true when considering deposits, withdrawals, and money transfers. If the business accepts physical checks, then it would be prudent to find a bank that allows for digital deposits of checks (smartphone app or digital scanning) rather than requiring frequent physical trips to the bank for deposits. If the business accepts electronic transfers and payments, ensure that the bank easily accepts these and provides notifications when direct deposits are received. Operators of brick-and-more stores may wish to have a bank with a nearby physical location that provides a dropbox for overnight deposits.

    It’s important to know that even business checking accounts advertised as “free” may still have fees. Some banks require a business to maintain a certain minimum balance in their account, or a maintenance fee is charged. Using online alerts can avert disaster when dealing with maintenance fees. Other fees may include fees for making too many deposits or withdrawals and not using the account frequently enough. Business account fees are often higher than those for personal accounts.

    Utilizing paperless statements and digital deposits can result in the removal of monthly maintenance fees from some business accounts. Another way to avoid fees is by bundling accounts such as linking business checking and savings accounts or merchant services accounts. This often eliminates monthly maintenance fees.

    If the intent is to expand the business, knowing what kind of credit is available is very important. Key questions to ask are:
    • What are your loan interest rates like?
    • How do you qualify small businesses for loans?
    • If my loan needs change, are you flexible?
    • What are your line of credit terms like?

    Size Matters

    Small local banks generally provide personalized service. These banks offer human interaction for customer service rather than complicated phone systems or online self-help. A business is likely to work with the same representative for years. Small banks also offer a better chance of receiving a loan based on more than just a credit score. On the downside, smaller banks tend to have higher fees. They also lag behind when it comes to implementing technological advances such as smartphone apps and online banking.

    Small businesses with a strong growth strategy may find a medium-sized state or regional bank more advantageous. These banks serve a state or region and still put a focus on personalized service but are often made up of several smaller local branches. One significant benefit of using a regional bank is that they will often focus on the local market conditions when considering providing a loan. Regional banks often have higher fees associated with them than the larger national banks do. Compared with the larger national banks, regional banks lag behind with technological offerings. Large, national banks often offer the lowest fees and the latest technology. They also have expertise in assisting with international clients and transactions. The downside to such large banks is that they rarely offer the personalization received from smaller banks and they rely on “hard numbers” for decision-making.

    Pain point resolution

    Business banking accounts address several pain points for small businesses. These solutions include providing a professional appearance, automation, transaction assistance, and protection in various forms. One area lacking for many small businesses is expertise in international transactions. Business banks have staff on hand and experience in handling these transactions and can quickly alleviate this common pain point. Routine expenses and payroll are rife with opportunities to make simple accounting mistakes. Automation in bill payment and payroll simplifies financial management and reduces the chances of late fees.

    Protection is afforded to small businesses by utilizing a business bank account. These accounts keep business funds separate from personal funds. Merchant services provide purchase protection for customers and keeps their personal information secure. Additionally, not all employees need the same level of access to all business accounts. Business banks allow for the customization of employee access with online accounts. As mentioned earlier, business accounts allow for the business name to be front and center for the company. This lends to the professional look of the company’s checks and other financial documents. This professionalism also reduces the chance of audits from the IRS.

    Accounts for businesses frequently come with an option for a line of credit. Emergencies and new equipment needs can happen at any time, and the line of credit can make the difference between a business succeeding or failing. Credit card accounts associated with the business can also aid in large purchases and help establish a history of credit for the business.

    Main reasons for needing a business account

    If a business is incorporated, even as a sole proprietorship, then the IRS requires that the business have a business bank account. While the above fact is a powerful motivator, there are several additional reasons for a small business to use a business banking account. Bank of America mentions that a “small business owner may not have liability protection if he or she combines personal and business finances, which could mean creditors - including the Internal Revenue Service — can go after personal assets to collect on a debt.”

    A business checking account can help to establish a business’ credit rating, which is different from the business owner’s credit rating. The majority of business checking accounts also accumulate interest. Most business accounts also allow for more than one person to be authorized to make deposits, sign for debit card transactions, and write checks. Finally, business banking also opens up the opportunity of using merchant accounts. These accounts do require a fee and allow businesses to accept debit and credit card purchases.
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