Top tips for banking and finance for freelancers

We live in a new remote era of work. Gone are the days of the giant office building. The COVID-19 pandemic has changed the way people live and work, both in the United States and across the globe. This era of remote work has closely followed a transition into the “gig” economy. More people than ever before classify themselves as “independent contractors.” People want to be their own boss and this lifestyle lets them do it.

And yet being an independent contractor, or freelancer in short, still requires a business bank account, financial planning, and prudent financial management. They may even require the use of small business loans, depending on the reason. Let’s dig deeper into this topic.

Examining the Financial Life of a Freelancer

Handling and organizing money is still difficult for many people, even if it’s essential to our survival and growth. Freelancers generally do not have a giant back office support staff helping them with accounting or other financial decisions. Whether you’re conducting business banking in Salt Lake City or on the East Coast, these financial considerations are the same.

New freelancers must also consider their rates. Do you charge fair rates? Perhaps you undercharge. And how do you actually handle money that comes in? Where does it go? How you organize the money you earn —and how you use it — is a true life skill.

Freelance workers still require the same products and services as would a sole proprietor business owner. The first step is to set up a business bank account in Lehi, Salt Lake City, or wherever you are in Utah. To do that, you will need to apply for an Employer Identification Number (EIN). This is like a social security number for your company. And it’s how the government, IRS, Small Business Administration, and other government agencies will identify you. Applying for an EIN is free.

You may want to consider opening more than one business bank account so that you can move money between accounts and have accounts for different purposes. People don’t realize how convenient it’s to have more than one account… until they do! Here at First Utah Bank, we offer a variety of business checking accounts fit for just any type and size of company.

Know Your Tax Burden and Create a Business Plan

They say there are two constants in life: death and taxes. And we can certainly concur when it comes to taxes. Taxes have to be paid no matter what, but this is especially true for business owners. You could see your entire operation shut down and livelihood ground to a halt simply because you failed to properly account for or pay your taxes. Want help estimating your taxes? Simply click here.

Most small business owners handle their taxes on a quarterly basis. You should set aside money every month to pay your taxes. The last thing you want to do is owe a ton of back taxes because you did not pay quarterly. You must be able to pay your taxes from the profits of your work, and that should be done first before anything else. Capital investment can wait while you owe this obligation.

The next foundational aspect of running your small business in Salt Lake County is your business plan. It’s all too easy to treat freelance gigs like hobbies rather than jobs or careers. But your freelance career IS your job. Create a business plan to ensure your company has staying power. A business plan essentially is nothing more than a plan for how you will make money throughout the year.

For example, let’s say that in 2023 you want to start off with seven interior design clients from January through July. Then, in the summer, you take two months to work with interior design influencers and create media collaborations. From August through the end of the year you expand your website, grow your audience and generate revenue from sponsored partnerships. While there are a lot more details to make it all work, this is a business plan.

Do You Need Outside Financing?

There are many different business loans for startups. To get a loan, you will need to explain your business plan and pitch to someone why they should provide you with financing. This could be an internal benefactor of some kind, or a bank or other lending institution. Our business lending division proudly offers business financing for companies of all types and sizes.

Whether you go with a First Utah Bank loan, or otherwise, lenders will want to see your working capital, revenue, sales history, and any other information related to cash flow or losses. They will also likely consider things like personal and business credit scores, debt-to-income ratio, time in the business, collateral, or any other personal assets.

Here at First Utah Bank, we’ve been proudly providing business checking, savings, loan and other services to business owners, freelancers, and digital nomads. Our bankers know the ins and outs of our products and can help your small business check the financial boxes on your way to success. You can reach our Salt Lake City location at 801-308-2273.