Overdraft fees can be a major drain on your finances. Some banks charge more than $30 per overdraft and potentially charge that fee multiple times per day if you keep making transactions that overdraw your checking account. If you want to avoid these fees, you can typically opt out of overdraft coverage with your bank. It can be useful, however, to set up overdraft protection instead of opting out so you don’t find yourself unable to pay for something urgent.

Overdraft protection is a checking account feature that some banks offer as a way to avoid overdraft fees. There are several types of overdraft protection, including overdraft protection transfers, overdraft lines of credit and grace periods to bring your account out of a negative balance. Some other overdraft coverage programs might be a combination of these features.

Before you opt out of overdraft protection altogether — which means your bank will decline any transaction that would result in an overdraft — consider how you might need overdraft coverage in an emergency. For example, maybe you’re using your debit card to pay for gas on a road trip. You need enough fuel to get home but don’t have enough money in your checking account. Instead of dealing with running out of gas, you may want to deal with an overdraft.

Here are more details about the main types of overdraft protection that banks tend to provide.

Overdraft protection transfers. When a bank allows you to make an overdraft protection transfer, you can link a savings account, money market account or a second checking account at the same bank to your main checking account. If you overdraft your checking, your bank will take the overdrawn funds from your linked account to cover the cost of the transaction. Many banks allow this service for free, but some banks charge a fee.

Overdraft lines of credit. An overdraft line of credit functions like a credit card — but without the card. If you don’t have enough money in your account to cover a transaction, your bank will tap your overdraft line of credit to cover the remainder of the transaction. Lines of credit often come with steep annual interest rates that are broken up into smaller interest charges that you keep paying until the overdraft is paid back. Be aware that a line of credit could end up being expensive if you use this option to cover your overdrafts.

Grace periods. Some banks offer grace periods, so instead of immediately charging an overdraft fee, the bank will give you some time — typically a day or two — to return to a positive account balance after overdrafting. If you don’t do so within that time frame, your bank will charge you fees on any transactions that overdrafted your account.

Other coverage programs. Some banks are taking a new approach to overdraft protection by offering what’s basically a free line of credit with a longer grace period for customers to bring their account to a positive balance. One example, Chime’s SpotMe® program, allows customers to overdraft up to $200 with no fees. The customer’s next deposit is applied to their negative balance, and once the negative balance is repaid, customers can give Chime an optional tip to help keep the service “free.”

Chime says: “Chime is a financial technology company, not a bank. Banking services provided by, and debit card issued by, The Bancorp Bank or Stride Bank, N.A.; Members FDIC. Eligibility requirements and overdraft limits apply. SpotMe won’t cover non-debit card purchases, including ATM withdrawals, ACH transfers, Pay Friends transfers or Chime Checkbook transactions.”

Not everyone wants to take on the challenge of building a business from the ground up. An attractive alternative can be to step into a business that’s already up and running by purchasing it from the current owner. Some advantages of buying a business may include easier financing, an established customer base and an existing cash flow.

Buying a business is different from buying a franchise. Franchises have a set business model that’s proven to work. However, when you buy an independently operated business, it’s important to show the lender that you, your previous business experience and the business you want to buy are a winning combination.

Because lenders can view the performance record of an existing business, it’s typically easier to get a loan to purchase an existing business compared with startup funding. However, your personal credit history, experience and details about the acquisition business still matter.

Through credit reports and credit scores, lenders are able to assess how you’ve managed debt in the past and potentially gain insights into how you will handle it in the future. Your education and experience will also be evaluated.

Solid credit history: Lenders look to see if you have a history of paying your debts. Foreclosures, bankruptcies, repossessions, charge-offs and other situations where you haven’t paid off the full amount will be noted.

Business experience: Having worked in the same industry as the business you want to purchase is helpful. Related education can also be viewed as a positive.

Having a track record of operating other successful businesses can have a positive influence on lenders when it comes to buying a new operation.

Record of generating revenue: Business financial statements can help a lender document that your current or past businesses were well-managed and turned a profit.

Positive credit record: Lenders review business credit scores and reports to verify creditworthiness and to identify liens, foreclosures, bankruptcies and late payments associated with your other businesses.

Just because a business is operating doesn’t mean it’s a good investment. Lenders will ask for documentation, often provided by the current owner, to assess the health of the operation.

Value of the business: Like you, your lender will want to ensure that you’re buying a business that has value and that you’re paying a fair price.

Past-due debts: Lenders will be interested in the business’s past-due debts, which may include liens, various types of taxes, utility bills and collection accounts.

Most lenders will let you know what they want included in the loan application package, but there are some personal documents that are typically requested, as well as ones related to the business you want to purchase.

The following documents are used to evaluate your personal finances, business history and plans for operating the business after its purchase:

• Personal tax returns.

• Personal bank statements.

• Financial statements for any of your other businesses.

• Letter of intent.

Documents from the current business owner will also be evaluated. Some common ones requested by lenders include:

• Business tax returns.

• Profit and loss, or P&L, statements.

• Business balance sheet.

• Proposed bill of sale.

• Asking price for inventory, machinery, equipment, furniture and other items included in the sale.

Compared with finding a loan to start a business, getting funding to buy an existing business may be easier. Here are three popular funding options to check into for a business loan:

Banks generally offer the lowest interest rates and best terms for business loans. To qualify for this type of loan, you’ll typically need a strong credit history, plus the existing business will need to be in operation for a certain minimum of years and generate a minimum annual revenue amount set by the lender.

If borrowers don’t qualify for a traditional bank loan, then SBA loans, ones partially guaranteed by the Small Business Administration, may be the next option to explore. Because there is less risk to the lender, these loans can be easier to qualify for. Banks and credit unions frequently offer SBA loans in addition to traditional bank loans.

A business plan can improve your chances of being approved for a loan by helping to persuade lenders that your business is worth investing in and that you have the ability to repay the loan. Many lenders will ask that you include a business plan along with other documents when submitting your loan application.

When applying for a business loan, you want to highlight your abilities, justify the need for your business and define your financial needs. A well-thought-out business plan gives you the opportunity to do that.

A traditional business plan format is typically what lenders are looking for as part of your loan application. This comprehensive layout gives you space to provide detailed information about your business.

The executive summary is used to spark interest in your business. It may include high-level information about you, your products and services, your management team, employees, business location and financial details. Your mission statement can also be added here.

The company overview is an area to describe the strengths of your business. If you didn’t explain what problems your business will solve in the executive summary, do it here. Highlight any experts on your team and what gives you a competitive advantage. You can also include specific details about your business such as when it was founded, business entity type and history.

Use this section to demonstrate the need for what you’re offering. Describe your products and services and explain how customers will benefit from having them. Explain any patents or copyrights here.

Here you can demonstrate that you’ve done your homework and showcase your understanding of your industry, current outlook, trends, target market and competitors. You can add details about your target market that include where you’ll find customers, ways you plan to market to them and how your products and services will be delivered to them.

If you didn’t cover marketing strategies in your market analysis section, you can devote an entire section to the topic. The main goal is to provide details on how you plan to attract your customers and build a client base. You can also explain the steps involved in the sale and delivery of your product or service.

The operational plan section covers the physical requirements of operating your business. Depending on your type of business, this may include location, facility requirements, equipment, vehicles, inventory needs and supplies. Production goals, timelines, quality control and customer service details may also be included.

This section illustrates how your business will be organized. You can list the management team, owners, board of directors and consultants with details about their experience and the role they will play at your company. This is also a good place to include an organizational chart.

This is where you explain the loan amount you want and how the funds will be used. You can add details about how the money will be spent. Also include your strategy for paying off the loan.

Financial statements can indicate the financial health of a business and also demonstrate to the lender that you have the ability to repay the loan. Include three to five years of actual or projected income statements, cash flow statements and balance sheets. For an existing business, consider also including an expense analysis and a break-even analysis. When using forecasted statements for a new business, explain your projections. Graphs and charts can be useful visual aids here.

Finally, if necessary, supporting information and documents can be added in an appendix section. This may include letters of reference, product pictures, licenses, permits, contracts and other legal documents.

A lender will typically evaluate your loan application based on five C’s — or characteristics — of credit: character, capacity, capital, conditions and collateral. While it won’t contain everything the lender needs to complete its assessment, your business plan can highlight your strengths in each of these areas.

A lender will assess your character by reviewing your education, business experience and credit history. This assessment may also be extended to board members and your management team. Highlights of your strengths can be worked into the following sections of your business plan:

• Executive summary.

• Company overview.

• Management team.

Capacity centers on your ability to repay the loan. Lenders will be looking at the revenue you plan to generate, your expenses, cash flow and your loan payment plan. This information can be included in the following sections:

• Funding request.

• Financial statements.

Capital is the amount of money you have invested in your business. Lenders can use it to judge your financial commitment to the business. You can use any of the following sections to highlight your financial commitment:

• Operational plan.

• Funding request.

• Financial statements.

Conditions refers to the purpose and market for your products and services. Lenders will be looking for information such as product demand, competition and industry trends. Information for this can be included in the following sections:

• Market analysis.

• Products and services.

• Marketing and sales plan.

Collateral is an asset pledged to a lender to guarantee the repayment of a loan. This can be equipment, inventory, vehicles or something else of value. Use the following sections to include information on assets:

• Operational plan.

Small-business owners tend to stand by their bank.

For some, that allegiance is due to loyalty: 40% of business owners say their bank appreciates their business, and 30% feel they are treated better than the average customer, according to J.D. Power’s 2021 U.S. Small Business Banking Satisfaction Study.

In other cases, it’s due to inertia. On average, 14% of small-business owners plan to switch business banks in any given year, but only about 7% actually do so, according to data collected by J.D. Power from 2018 to 2021.

“They may complain about their bank, but they just sort of figure ‘Well, they’re all the same,’” says Carolyn Katz, a business advisor and certified mentor with SCORE, a national volunteer organization that offers free business mentorship.

Sticking with a business account that doesn’t suit your company can hurt your bottom line. Excessive fees, restrictive limits and insufficient business products can cut into profits and stall business growth. And all are cues that it’s time to shop around for a business bank account.

Exceeding transaction and cash deposit limits is a good sign your business has outgrown its business checking account. While it’s tempting to simply upgrade to the next account tier your bank offers, now is a good time to explore your options and compare limits, fees and services at other banks. More on that below.

While some fees are expected, charges for overdrafts, wire transfers and ATM usage vary from one bank to the next.

Some business accounts charge $35 or more for overdrafts, for example, while others charge $25 or less — and some don’t charge for overdrafts at all. Compare fees at local banks, credit unions and online banks to find a better fit for your business.

If your primary bank turns you down for a business loan, explore other options. Smaller banks, credit unions and community development financial institutions often have more flexible lending standards than large banks.

At small banks, for example, 66% of applicants were approved for at least some funding in 2021, compared with 48% of those who sought funding with a large bank, according to the Federal Reserve’s annual Small Business Credit Survey.

Applicants at small banks were also less likely to report challenges with the application process, funding time, interest rates and repayment terms.

At some point, your business may need merchant services, payroll support or a business credit card. While your bank may offer these products, it’s smart to research rates, fees and features at other banks and service providers.

A business card with a long 0% intro annual percentage rate period, for example, can help your business finance small purchases and avoid rising interest rates (provided you pay off the purchases before the promotional period ends).

No bank is 100% free of issues and errors; the key is how your bank handles them.

Does it take multiple calls, emails or visits to resolve an issue? Do you get conflicting answers to the same question? Do you struggle to even find someone to talk to?

“The account I closed first when I had my own business was the one where I just could never talk to a human being,” Katz says. “If I called them, when I walked into my local branch, they couldn’t find my information; they didn’t know what was going on.”

Another red flag is service that doesn’t match your business hours or style. A bank that handles all customer questions via email might work for an e-commerce business, but it’s less than ideal for a truck driver.

You don’t need to make a clean, swift break from your current business bank, Katz says.

“It’s not like breaking up with your boyfriend. You don’t have to call it quits all in one day,” Katz says. “Take some money, put it into a new account, start using that more and give the other account some time to age out.”

You can also keep your current account if it works for you in certain ways (but be mindful of potential monthly fees). Maybe your bank offers the most competitive terms on small-business loans, for example, but you open a new account elsewhere to take advantage of a free business checking account or a business credit card with stellar rewards. Different banks have different strengths, after all.