Current v. Savings: Does my account impact my business financing prospect?


If you’re running your own small business and you need business financing, the type of bank account you use for business transactions impacts whether a lender will approve your loan request or not. It also affects the loan amount and interest rate they offer you. Let’s find out why.

What type of bank account should I use for my small business?

In general, lenders prefer to lend business financing to SMEs that use a Current Account to conduct their business transactions.

This is because banks usually offer current account products to businesses only, so lenders can treat your Current Account as a pure business account that has a record of all your business transactions.

Opening a Business Current Account requires more documentation than a Savings Account, including your GST registration or your trade license, in addition to your individual KYC documents. These requirements make it difficult for individuals to open Current Accounts.

Finally, Current Accounts also have more features when compared to Savings Accounts that benefit business owners. These include:

  • A minimum monthly account balance between Rs. 5,000 – Rs. 25,000.
  • It’s generally a non-interest-bearing bank account which means you do not own any interest on the money in a Current Account.
  • There are no limits on the numbers of deposits or withdrawals you can make in a month with a Current Account, as long as you maintain the minimum account balance.
  • There is no restriction on the value of deposits or payments made.

See Kotak Mahindra Bank’s requirements to open a Current Account.

What are the benefits of using a Current Account for my small business?

  • The minimum account balance requirement forces you to always have money in your account. This means when a lender reviews your financial statements, they know you will always have money in the bank to repay your EMI instalments reducing the risk for them and increasing your chances of getting approved for the business financing you need.
  • Lenders assume all transactions made from your Current Account are related to your business and are not your personal expenses. If you use a Savings Account for your business, it makes it harder for them to distinguish personal expenses from your business expenses. This increases the time it takes them to approve your loan while also reducing your chances of being approved for business financing.
  • Current Accounts offer you the freedom to make larger volumes and amounts of transactions in a month. This isn’t possible with a Savings Account and is beneficial for businesses that make many transactions every month.
  • When you have a Current Account with a lender, they may qualify for a pre-approved loan based on your bank account transactions alone. Your bank has access to rich data on your financial transactions. Based on this data, your bank will assess how much they should lend to you at terms that you will be able to afford.

What are my chances of getting business financing if I use a Savings Account for my business?

CreditEnable partners with over 25 leading lenders in India to help SMEs access formal business financing.

From our experience, it is rare for lenders to lend to a business that uses a Savings Account for their business because it is difficult for the lender to differentiate between your personal and business expenses when you use a Savings Account.

However, in some cases, lenders are willing to make exceptions. This depends on your business type and sector and the loan amount you’re requesting. With a Savings Account, the lender will offer you a smaller loan amount at a higher interest rate because it is riskier for them to lend to you.

At CreditEnable, we recommend all our SME customers use a Current Account for their business.

Why should I apply for small business financing with CreditEnable?

Applying for business financing with CreditEnable is simple and fast.

Though you may qualify for pre-approved business financing with the lender you already bank with, that pre-approved amount and loan terms are based on the transaction records from just one of your bank accounts. In addition to this loan, you may have more business financing requirements that are larger than the pre-approved amount your current bank is offering you.

So, using CreditEnable, you can apply for more business financing in addition to the pre-approved loan your bank is offering. When you apply for business financing with us, we compare your needs against your financial history, bank statements from all your bank accounts, and your credit report, among other things, to determine your creditworthiness. Since our assessment is based on a larger data set, we develop a more holistic understanding of your financial needs and then match you with one of our lender partners who are most likely to approve your business financing request.

Our lender partners offer small businesses many different business financing options, including unsecured and secured business loans, loans against property, working capital loans and overdraft facilities.

Learn more about why CreditEnable is right for your business needs.

Apply for business financing with CreditEnable now.