Lance Bank Review – Banking for Freelancers and Soloprenuers

Lance freelance banking starts as an app. – How Does Lance Banking Work?

A professional freelance writer is a lot of things. In addition to being a freelancer, I’m a small business owner. I’m an entrepreneur. I’m a soloprenuer, if you’re the kind of person who likes making up buzzwords. If you’re from the IRS, I’m a sole proprietor. So, I was impressed with a recent email / press release that managed to target me as several of those things at once.

The subject line mentions Lance Bank “targeting freelancers.” When the email is open, the headline says, “Lance is the Self-Driving Banking Account for Solopreneurs.” — Hmmmm, marketing-speak. The first sentence of the text speaks of a, “business bank account for freelancers and side hustlers.”

Personally, I wouldn’t have gone with ‘side hustlers.’ To me, that phrase brings down the overall, “We take you serious. We understand that your freelancing business is a real business with real needs,” vibe, but do you.

Maybe they had research or focus group marketing that liked it.

But! This article isn’t about how I would write the Lance press release, it is about the new Lance freelancer bank offering.

What Is Lance Bank?

I already have a small business bank account. They aren’t exactly hard to get. I have two actually, one with a nationwide, big-name bank, and one with my local credit union. But, Lance already got me to open the email, and I feel like we should get something out of it. Let’s dive in.

According to this press release there are 60 million freelancers in the U.S. Obviously, this number depends on how you define freelancer, but let’s just go with it. Supposedly the founders of Lance (former freelancers, of course) spent the last year talking to self-employed individuals and found that they were paying monthly surcharges for standard business banking accounts and accounting software solutions. But, worst of all, these business owners, “weren’t able to surface their 2019 income or easily fill out Schedule C forms for tax filings and loan offerings.”

I don’t know who these small business are that they talked to, but any of them who actually make enough money from freelancing to be able to apply for a loan based on their income, and still can’t “surface their income,” are not the sharpest of freelancers. People paying monthly fees for things that should be free is endemic in the U.S. financial system, so I don’t doubt it. However, your low-level, financially aware, freelancer shouldn’t have much trouble avoiding a small business banking monthly fee. (If you can’t, try your local credit union…)

And, what about Schedule C?

No bank account is going to make that small business tax form any easier, other than possibly putting all of your expenses in one place, but that isn’t the hard part of Schedule C. The hard part of freelance taxes and Schedule C is record keeping year-round, and there is no way around that. Even Lance Bank isn’t going to show more on your standard bank statement than you spent $78 at Staples. It’s your job to document that purchase as toner for the printer that you use in your small business.

Getting a list of transactions is easy with any financial account. Heck, Capital One sends me an End of Year Summary that shows everything I spent, neatly sorted into categories like Travel, Grocery, and Services. It also tells me that I spend way too much money at restaurants, but that is for a different article.

Is Lance Bank Worth It, or Is Lance a Scam?

Lance calls regular small business accounts “passive” and calls its own account “active” and “self-driving.”

What does an active freelance business account do?

What does Lance do, exactly?

The active part of Lance business banking account is essentially a single account with three sub-accounts. The idea is that you route all of your income into your Lance account. Lance then splits that money into three sub-accounts. One sub-account is your “salary” which you set as a percentage of your incoming money.

The second subaccount is for taxes. This is theoretically where Lance is worth it. Calculating and paying your taxes for you automatically. There are no details on how Lance does this other than to say that there is an algorithm.

The third sub-account is your profit, or extra account. This seems to be the leftover of what remains from the first two subaccounts.

You also get an “allocated business expense balance” that “interacts” with your automated tax withholdings. – Unfortunately, there are not real details on how this works, or how anything is calculated.

The above is what you get for free.

Lance Pro Small Business Bank Account

Ironically, after including the detail that many small business owners interviewed by Lance paid monthly charges for banking accounts that they didn’t need to pay, Lance offers a pro service which, charges a monthly fee for banking.

Actually, the pro version will pay your quarterly taxes from the amount you withheld. It also “pre-populates an anytime Schedule C form.” So, for $12 x 12 months, or $144, Lance will make four payments to the IRS for you.

I’m not sure what the pre-populated anytime Schedule C form is. What I’m really not sure about is why you would need it. No one ever wants to see your “in-progress” Schedule C. If you want a loan, or someone wants to look at your business, they want the most recent Schedule C you filed with the IRS. In addition to being a “complete” form, it also means you aren’t fibbing, because you filed that one with the IRS, who doesn’t take kindly to fraud.

Lance also points out that while they will send whatever dollar amount that algorithm of theirs says to send to the IRS on your behalf, you still have to fill out, and file the actual forms, which is actually the hard part.

Is Lance a Scam?

I’m going to say that as a small business owner, I’m fine with my current small business, freelance banking setup. It is just a regular small business checking account. Like Lance, I direct all of my income there. Unlike Lance I use a cash-back or miles-rewards credit card for my business expenses. This credit card statement lists my business expenses same as using a Lance debit card.

I suppose I could set aside my quarterly tax payments into a separate account or sub-account. Instead, I just keep kind of a running 20% (more on larger payments) and then send that off to the IRS four different times per year. That is accurate enough for most quarterly tax payment purposes. Again, the actual hard part of small business accounting is ongoing record keeping and then filling out your Schedule C.

If they really could fill it out automatically, that would be something, but again, how do they know what the $298 purchase at Walmart, or from Amazon was? If it is a printer, it might go under supplies or equipment. If it’s a bunch of paper, pens, notebooks, and so on, then it is supplies. If it’s a new sign, that would be advertising, and so on.

I suppose if you really have trouble with your quarterly tax payments at least Lance will make sure you send some money to the IRS on the right dates. I guess that could be worth $144 per year for someone who is really adverse to handling money. Otherwise, if your small business finances were actually complicated enough to need this level of accounting and tax help, chances are that they are too complicated to handle automatically, no matter how clever the algorithm.

Lance is FDIC insured, so Lance is not a scam bank.

Lance is a good idea, it just turns out that freelancers really aren’t that different than any other small business owner and most small business banking accounts will be just as useful.