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In this issue
Try this: Evaluate financial accounts from software companies, like Shopify.
Apply for this grant: $1,000 from Founders First.
In the news: Data about how microloans help businesses grow.
Should you bank with … your website builder?
Earlier this month, Squarespace announced that its users now have the option to open financial accounts on the platform. Shopify, Square and QuickBooks offer similar accounts, all of which I’ve reviewed over the last few years.
This is part of a trend I’m watching across the industry: All these brands are trying to become “platforms” that offer everything a business owner needs. Not only can you build your online store, but you can also take payments and store that money in a separate account. Some will even lend you money.
Are these accounts good choices? That depends on what you’re looking for. Here’s my FAQ.
Are these actually bank accounts?
Technically no. None of these companies are full-on banks. (Square has a limited banking charter. It provides some of its own financial products, but not its checking account.)
They’re also very careful to not say they are banks, lest they get into hot water with regulators. In fact, in its press release about its new accounts, Squarespace describes its offerings in multiple ways without using the word “bank.” That word only shows up in a disclaimer. It’s a little impressive, to be honest.
But that doesn’t make these accounts untrustworthy. All these software companies partner with FDIC-insured banks. Those partner banks actually store your money. So your software provider doesn’t benefit from holding your funds, as banks do. Instead, the upside for them is locking you into their ecosystem.
Beyond that, if your software provider were to go under, your money should be safe in the partner bank’s coffers. But recovering funds from a neobank can be a messy process, as we saw when a banking middleware company failed in 2024.
Can they do everything a bank account can do?
Generally no. Most offer a debit card. But you may not be able to deposit cash, write checks or send wire transfers.
You should probably have a bank account with those features, even if you don’t do any business outside of your chosen platform. That’ll give you the option to use those services if you need to.
That account could be with a traditional bank (think Chase or Bank of America) or a neobank (like Bluevine or Relay). Neobanks have a lot in common with these platform-specific accounts — they’re tech companies that partner with FDIC-insured institutions. The big difference is that they focus on financial services first, rather than making them an add-on.
Many of these bank and neobank accounts now have useful built-in tools, like sending invoices and processing customer payments. You usually can’t use them to build a website, though. Here’s our roundup of the best online business checking accounts.
Is there anything that platform-specific accounts do better?
The biggest advantage of these accounts is that after a customer pays you, you can usually access that money right away. Shopify is an exception — some users may have to wait up to five business days for purchases to become available.
For an analogy, think about your Venmo or CashApp account. If you have money in there, you can use it to pay someone else immediately. But if you want to transfer it to your bank account (without paying a fee, at least) you’ll have to wait a couple days for the funds to show up.
When your bank account and payment processor are separate, it can take a few days to transfer revenue into your account so you can use it. But Squarespace and Square work more like your Venmo account — money should arrive the same day, and then you can spend it on something else.
If your cash flow is tight, it’s nice to be able to spend money as soon as it hits.
Pro tip: A business credit card can also help you manage cash flow. Spend the money that you know is owed to your business, then pay down your card at the end of the month. Here are our top choices.
Are there any rewards?
Generally, yes. Most of these accounts pay interest, or a reward that looks like it. And the rates can be eye-catching. Shopify Balance’s current “earnings rate” is 2.29%, which is higher than most other business checking accounts. QuickBooks Checking pays 3% APY on certain funds, which is in money market account territory.
That’s great if you have a plan for earning those rewards — which you might need, because they can be hard to access.
QuickBooks, for instance, only pays interest on funds you move into “envelopes.” You have to actively move your money out of envelopes to spend it. I don’t know about you, but I’m probably not going to remember to do that if I have five other things on my to-do list.
Several banks and neobanks pay a flat interest rate on all your balances, though most are below 2% now. See some of interest-earning checking accounts here.
What are the drawbacks?
When I’ve given these accounts star ratings, their scores come out relatively low. That’s because most are missing a few core banking services.
Depending on which account you’re considering, check whether you can send checks, deposit cash or send or receive wire transfers. You can probably withdraw cash at ATMs, but not without fees.
It’s also generally harder to contact customer service at a software company than at a bank or fintech. Obviously, you can’t walk into a Squarespace branch and get your questions answered. But you also can’t call someone. Instead, that company directs you to an AI chatbot. You can ask to talk to a person, but it’ll be via live chat or email.
The majority of banks and fintech companies, on the other hand, still have staffed customer service phone numbers.
Everyone’s customer service preferences are different. For me, a chatbot might be fine when I’m trying to change my website theme. But when it comes to my cash, I want to talk to a human.
So … should you use one of these accounts?
If you do most of your business on a particular platform, opening a checking account facilitated by that company can make sense. It’s nice to be able to spend your funds right away instead of waiting a day or two for them to transfer. And if you can earn a high interest rate, go for it.
I’d still recommend opening an account at a different bank or fintech company, though. That’s for two reasons:
Banks sometimes freeze accounts without much explanation. A second account gives you flexibility if that happens.
You never know when you’ll need to send a check or a wire transfer, and it’s good to be prepared.
If you don’t have a business bank account yet, open one today. It’s typically free, and it’s an important tool for separating your business and personal finances. Here are NerdWallet’s picks for the best free business checking accounts.
Grant opportunity: $1,000 microgrant from Founders First
NerdWallet’s Karrin Sehmbi finds and shares these grant opportunities.
If you’re a mom and you run a small business (so really, you could run the world), read on!
Founders First offers $1,000 Kitty Fund Mompreneur Business Grants. Applications are open to mothers who own small businesses with two or more employees. The program awards a total of 20 grants.
The application is open now and must be submitted before April 14.
All 20 grant recipients also get free access to one of two Founders First business programs. One gives you access to weekly educational sessions on marketing, sales, operations and finance. The other is an online, six-session program designed to hone your leadership skills. Each is valued at over $1,000.
In addition to identifying as a mom business owner, applicants must be the CEO, president or owner of a U.S.-based business that’s been in operation for at least one year. You must also employ between 2 and 100 people and earn no more than $5 million in annual revenue.
Feeling especially motivated? Visit our small-business grants page to learn about more grant opportunities you can apply for.
In the news: A big study shows microloans work
A “microloan” is a business loan of less than $50,000, give or take. You can often apply for one of these loans from a community development financial institution. CDFIs work with borrowers who might not qualify for traditional loans, like entrepreneurs with bad credit.
Learn more about microloans, including Nerdwallet’s picks for the best lenders, here.
The Urban Institute released a report in mid-March about outcomes for more than 13,500 businesses that received microloans between 2014 and 2018. The median loan size in this study was just $11,500.
Researchers found that five years after taking out their loans, the following happened:
Borrowers’ personal credit scores went up. The median VantageScore (a credit scoring model) rose from 637 to 644.
Credit card utilization decreased a bit, from a median of 52% to 46%. That suggests that a) business owners ended up with stronger cash flow to pay down their cards, or b) credit card issuers began increasing their limits because they could pay down their cards more often.
Businesses took on more credit, with the median rising from around $1,250 to around $5,900. For businesses, credit isn’t a bad thing. It often means they’re expanding.
Altogether, this is another piece of evidence to show that small loans help businesses get their feet under them.
But financing isn’t a silver bullet. About 25% of businesses in the sample fell into a category researchers called “troubled.” For these businesses, credit scores fell by 81 points on average after they took out their loans. Credit card utilization jumped from 48% to 67%. And many more of these businesses ended up with delinquencies.
There weren’t clear indicators in advance that a business would end up “troubled,” though. In fact, these business owners had the highest median credit scores of any of the groups researchers created.
Long story short: Getting a microloan, or any business loan, is not magic. But it is, on average, good for your business.
I strongly recommend getting to know your local CDFI. In addition to making loans, they might offer financial coaching or programming to help you learn. You can find your nearest one here.
