Choosing a Business Bank Account For Your German GmbH

So you’ve successfully founded your German GmbH company. You managed to follow these very intuitive 14 steps and, after waiting a very short period of only 2-3 months, you now have it – your own company. Congrats!

(Irony aside, founding a company in Germany is indeed entrepreneurship on hard mode)

Now, as part of the founding process, you have to choose your business bank account. Non-biased resources on this choice are surprisingly hard to come by on the internet, as everyone and their dog seems to be churning out LLM-generated content with affiliate links.. great. And people on reddit have an inexplicable bias towards recommending fintechs (Qonto, Wise, etc.) because they’re cheaper, completely forgetting the fact that their customer service sucks and that they randomly freeze accounts.

So it’s not quite as trivial on first sight. Here’s my take!

Here’s the main question you have to ask yourself:
Are you optimizing for cost and speed, or are you optimizing for availability?

And that’s it. Confused? Let’s get into it.

Basically, you have two choices: Newer fintech banks or old-school banks.

Fintechs: Optimized For Speed And Cost

Qonto and Wise are the most well-known ones here. These banks were startups themselves a few years ago, so their software is reasonably modern, where “modern” is defined as “it doesn’t suck”), and their pricing usually is cheap. They also have cool convenience features, like multiple debit cards, IBANs and sub-accounts.

Most importantly, they are fast. This is relevant when you’re founding your GmbH, because as part of the 14 steps, you have to do the “bank account dance” which involves:

1. Opening a bank account while your company is not fully founded yet;
2. Paying the initial share capital into that bank account and submitting a confirmation of that to your notary public;
3. Waiting for your notary public to push a button and upload a crappy XML file so that your company to be entered into the commercial registry (Handelsregister);
4. Notifying your bank that your company now actually exists so that they can remove any restrictions your account may have.

Entrepreneurship in Germany is easy!

Jokes aside, the take-away here is that you have much to gain if you optimize your for speed here. The faster your found your company, the earlier you can send out invoices, set up your Stripe / Paddle account, receive money, and all those other good things. And because opening your company bank account is a “blocking operation” during this procedure, any additional day you spend opening your bank account delays you getting started with your business. So if you can choose between opening a bank account in one day vs. opening a bank account in 14 days, you should choose the one-day bank account, because that’ll mean you’ll finish incorporating your company 13 days earlier.

And this is the biggest, and possibly most underrated, benefit of fintech banks: They are fast. Which makes the uniquely suitable for your company’s first bank account, the bank account you open during incorporation, because it speeds up your incorporation.

(Important note: Last I checked, Wise doesn’t support opening a business bank account for a GmbH which is in the process of being founded. So choose Qonto or one of the others.)

Contrast this with old-school banks which often take 1-3 weeks to open a bank account for your company, including having to sign forms in person, among other things. Crazy!

However, the biggest drawback of fintech banks is that their customer service usually sucks. Who knew that offering low prices usually means that there’s little money to spend on customer support?

You might think “I don’t need customer service” and, boy, are you wrong. Fintech banks love growth, because their investors love growth, so they love signing up new customers. However, at some stage they realize they might have signed up just a few too many customers which included just a few too many criminals, who are doing just a bit too much money laundering. So they try batch-kick-out the “illegal” customers by randomly requesting many of them to “re-verify”, which means re-uploading your company documents. Wise does this. If you fail to do so or screw up like I did and upload the wrong documents because you only skimmed the email, then your account gets frozen for multiple weeks (story here).

And that’s where the customer support comes in, because it’s really useful to be able to reach out to an actual human who responds to your messages when you bank account is frozen and you’re trying to run payroll.

Good luck with that. My experience with Wise has been that you can be lucky if you receive a response in a week or so.

So yeah. Treat a fintech bank account like something you could lose any day. Don’t rely on it, and most importantly, don’t rely on it for your payroll, because not paying salaries is a very ugly situation to be in.

But the TLDR here is that a fintech bank account is a great choice for your first bank account because it’s fast, affordable and convenient. Just don’t expect it to be available all the time, as it might randomly get frozen. More on “available” banks below.

But before that, here are the quick pros and cons of fintech bank accounts for your GmbH:

Pros:

• Fast! (<– Biggest benefit)
• Low cost
• UI which doesn’t suck

Cons:

• Your account might randomly get frozen (<– Biggest drawback)
• Customer support usually non-existent or slow

Old-School Banks: Optimized For Availability

Old-school banks are slow. If you open up a bank account with them while incorporating your GmbH, it will easily take 1-3 weeks. And that already assumes you can 1) get an in-person appointment right away, 2) teleport yourself into the branch and 3) sign the documents, with the customer rep sending them out the same day and 4) that the back-office people don’t screw up and lose your documents (happened to me).

Suffice to say, old-school banks are not the best choice when you’re optimizing for speed, and during the founding your German GmbH, you should indeed optimize for speed.

Choose a fintech bank when incorporating, end of discussion.

But fintech banks tend to randomly freeze your account. So that’s a drawback. How bad is this drawback? It depends. If you’re just starting out and sending out a few invoices each month, it probably doesn’t matter if your account is frozen for 2-3 weeks while the “Wise verification team” (had a great experience with them – just kidding) takes forever to reply to your emails. Still, you’re probably fine.

But if you already have employees and your monthly payroll is due, I’m not so sure how happy your employees will be if they receive their salary 3 weeks late because the “Wise verification team” is busy replying to other people’s angry emails.

In that case, it would be really helpful to.. be able to reach out to a human directly who responds within one working day? That would be amazing. Where would one be able to find such spectacular customer service? Does this even exist in the modern world?

Yes, it does – at old-school banks.

You get an individual customer rep and their email address, you can reach out any time, and they’ll respond within one business day. It’s amazing. Maybe you even get to know them personally when you open your account at their branch and sign the physical forms.

The irony, of course, is that you actually don’t need the customer rep that often, because old-school banks usually don’t have this weird habit of randomly freezing bank accounts.

But it’s still cool to have – there are other things which can go wrong, and it’s great to be able to reach a friendly human at any time.

If you’ve followed our Wise story also linked above, you can see that we initially started using Wise as our main business account. And Wise is cool! It’s free, you get all sorts of great convenience features like foreign-currency accounts, sub-accounts, etc., but.. one day, our account got frozen.

Since then, my opinion changed completely. I don’t care about convenience features. I don’t care about a nice UI. Heck, I don’t even care about a mobile app.

I just want a bank account which works, where “works” is defined as “doesn’t get frozen and I can talk to a human if there are problems”.

With these new requirements in mind, an old-school bank suddenly appears to be the winner.

Still, we’re keeping our Wise account for foreign currency stuff. It can’t hurt to have a backup account.

Oh, one more benefit of old-school bank accounts: Getting a line of credit.

Line of Credit

So, after ~3 years or so, you can ask your friendly bank rep whether you can get a line of credit, and usually they will grant it to you (assuming your business is profitable etc.). That means you can overdraft your bank account by e.g. up to 50k€.

This is what finance bros probably call “optimizing your liquidity” or whatever. Real humans would just describe it as “you can take cash out of the company and invest it, and this is a good thing”.

All of this sounds like abstract rambling, so a quick example. Assuming your company is profitable and has a monthly payroll of €30k. Also, it’s a consulting company, so revenue comes in irregularly – some months, say, €50k€, some months 0€.

In scenario a), you don’t have a line of credit, so you have to avoid (at all costs) that your account balance drops below 0€. That means you might want to keep at least €60k in your bank account, because, remember, your monthly payroll is €30k and some months might be without revenue, so you need a “buffer” of savings, in this case 2x monthly payroll. A finance bro might now look at this and say “ugh, you have 60k€ lying around in your company, doing nothing”, and that would be partially true. So let’s look at the alternative.

In scenario b), you have a line of credit of 50k€. This enables you to only keep 30k€ in your bank account as savings because, in the event of no revenue in one month, you simply use your line of credit. Your account balance would drop below zero and you’d pay some interest on that, but with more revenue coming in shortly, your balance will be positive again soon. As you’re only keeping 30k€ in the company now instead of 60k€, you can pay out the difference of 30k€ as dividends and invest it in ETFs or do other smart things.

So yeah, line of credit. Old-school banks are pretty accustomed to giving out a line of credit, as their typical customers are mid-sized, profitable businesses.

Fintech banks, on the other hands, mostly cater to startups, so very few of those offer this.

So – my recommendation is to move to an old-school bank once you have a monthly payroll. Keep the fintech bank account as backup, but use the old-school bank account for 99% of your day-to-day transactions.

And finally, here’s the pros and cons list:

Pros:

• Your account doesn’t get randomly frozen (<– biggest benefit)
• Very fast customer support, individual customer rep (<– also big)
• Line of credit available in the future (useful)

Cons:

• It takes weeks to open the account, have to show up in person and sign forms
• Web interface and mobile app often look like Windows 95
• Higher cost

Conclusion

So what should you do? Glad you asked. Here’s my playbook:

1. While founding your company: Choose a fintech bank which offers accounts for companies currently being founded (GmbH i.G.). I chose Penta at the time, now Qonto, but others are viable here, too (excluding Wise though, see above).
2. Once you have employees and monthly payroll: Open a second bank account with an old-school bank. I chose Deutsche Bank, but others might be viable here, too (Commerzbank, Sparkasse, Volksbank, etc.).
   Move most of your day-to-day transactions to this account, especially payroll.
   Apply for a line of credit 2-3 years later, once your company is profitable.
   Consider keeping the fintech account for minor optimizations, e.g. foreign-currency transactions. We still have our Wise account.

So our setup nowadays is based on a Deutsche Bank account which handles 99% of our transactions, and a Wise account as backup. We only use the Wise account for very obscure use cases. Two use cases come to mind:

• Paying freelancers in foreign currency because they, for whatever reason, require a bank transfer and don’t accept Euros (this combination is very rare).
• Large foreign-currency card payments, where the 1% foreign currency service charge on the Deutsche Bank debit card would feel significant, e.g. hotel rooms at a conference.

And that’s it! Let me know what you think in the comments. Good luck choosing your bank account! Given that the 14 steps of incorporating a GmbH in Germany are annoying and tricky, I guess the good news is that this step, at least, is one of the easier ones 🙂