How to Choose a Small Business Bank Account
One of the important things to think about when starting your small business is choosing a business bank account. There are several key things to consider - such as transaction and borrowing costs, what facilities the bank offers, and the type of relationship you want from your bank. Listed below are some suggestions which may help you decide which bank would best suit your needs.
1. You must set up a business account if you're starting up as a Limited Company, Partnership or most other business structures. Sole Traders can use their own personal accounts (but preferably should open a new account - Eva Brick trading as ABC to make accounting easier at the end of the year).
2. You do not have to choose a small business bank account simply because you are a personal banking customer at the same bank. You may well feel more comfortable with a bank you already know personally, but they may not offer the best deal for your business (and you may want to keep the two accounts seperate for other reasons).
3. You should only go for banks that have names you will have heard of, or possibly internet banking brands which are owned and operated by the big players. Smaller banks may promise higher interest rates (and/or lower costs) but will they still be around in a year / 5 years / 10 years and if not, what will have happened to your money? Do you remember BCCI?
4. Make sure you compare the details of several business bank accounts - a good place to start would be with the business or money section of the week-end papers. These will often provide you with an overview of the costs and charges associated with most business accounts in the UK. You could also ask your accountant or friends in business for suggestions.
5. Bank Charges - A major point to consider is how much it will cost you to have a business bank account. Many banks charge per transaction (although some will have a "free limit" before they start to charge). You may have a large number of monthly transactions to process, for example lots of cheques coming in to your account, so ensure you know exactly what charges will be levied on your account before signing up. Some of the larger also banks provide "free" banking for set periods to new businesses, so this may also be of interest.
6. Online Banking - this is an increasingly important service, and most of the bankc in the UK will now provide an internet service so you can check the status of your account at any time during the day or night. Rather than ringing the bank to check if a payment has been made to your account, you can do this yourself in a fraction of the time.
7. Interest - although the major banks have improved their interest rates on business current accounts in recent years they still vary wildly. Some high street names pay no (or very little) interest if your account is in credit. Remember that there is always a trade-off between free transaction costs and interest rates, so do consider the overall benefits each account would provide to your business.
8. Small Business Team - if possible, go for a bank which has a specialised small business unit. The setup process should be simpler, and they will use dedicated teams who will be used to dealing with all types of small business and their specific needs. Some businesses will need a regular contact with their bankers, if this is the case with your business you should go with a team you feel you can build a good relationship with.
Remember, if you make a mistake when choosing a business bank account that it is possible to change banks, although this can be more difficult than changing a personal bank account.
Links to Selected Banks
Important: You should note that this material is published for the information of our UK visitors. It provides only an overview of the regulations in force at the time of writing, and no action should be taken without consulting the detailed legislation and/or seeking professional business banking advice. We can accept no responsibility for loss occasioned by any person acting or refraining from action as a result of the above information