Choosing a business bank account

 A version of this article was first published in August 2021

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Whether you’re just starting out on a new business venture or you’re looking to make changes to your existing business banking, choosing the right business bank account is crucial in managing your small business’ finances effectively.

Finding the right business bank account can be time-consuming and overwhelming. Comparing business bank accounts involves evaluating various factors such as account features, eligibility criteria, and associated fees. That’s why we have put together this handy guide to help you make up your mind when it comes to choosing a business current account.

Understanding business bank accounts

Gain a foundational understanding of what business bank accounts are and how they differ from personal accounts.

A business bank account is a specialised type of bank account designed to manage the financial transactions of a business, distinct from personal bank accounts. Unlike personal accounts, business bank accounts are tailored to handle a higher volume of transactions and offer features that cater specifically to business needs. These features often include overdraft facilities, business credit cards, and access to business loans, all of which are crucial for managing cash flow and business expenses effectively.

Understand your business needs.

Before selecting a business bank account, assess your business’s size, financial goals, and long-term plans. Start-ups may prioritise low-cost banking with introductory offers, while established businesses might seek ethical banking options to align with their values.

You need a business bank account, especially if your business regularly engages in international transactions. While a separate account may not be legally required for sole traders, it is advisable to maintain clear financial separation, particularly for limited companies, to comply with bank terms and effectively manage finances.

Consider external factors like supplier costs and financial forecasting. A well-planned banking strategy ensures cash flow stability, helping your business grow.

Identify the specific banking requirements of your business to ensure you choose the right account.

When selecting a business bank account, it’s essential to consider the unique needs of your business. Think about the types of transactions you’ll be conducting, the frequency of these transactions, and the level of customer support you might need. For instance, a sole trader might find a simple account sufficient, while a larger enterprise may require a more comprehensive account with advanced features to manage complex business transactions and cash flow.

Look for introductory offers

Some banks provide free day-to-day banking or charge-free periods for new business customers. These offers can significantly reduce initial costs, making it easier to manage business finances. Be sure to check the terms, as some accounts may require a minimum balance to qualify.

Explore promotional offers that banks provide to new business customers.

Many banks offer attractive promotional deals to entice new business customers. These can include perks like free banking for an initial period, reduced transaction fees, or even cashback rewards. Such offers can significantly reduce your initial banking costs and provide a financial cushion as you set up your business bank account. However, it’s crucial to scrutinise the terms and conditions to understand any potential fees or charges that might apply once the promotional period ends.

Evaluate Online and Mobile Banking Features

If you prefer to manage finances on the go, look for accounts that offer robust online and mobile banking options. Having 24/7 access to your business accounts allows for secure transactions, automated payments, and improved cash flow management.

Assess the digital banking capabilities that can streamline your business operations.

In today’s fast-paced business environment, having a business bank account with robust digital banking capabilities is indispensable. Look for accounts that offer comprehensive online and mobile banking features, such as mobile apps, online invoicing, and account management tools. These digital features can help you manage your business finances more efficiently, saving you time and reducing the likelihood of errors. Additionally, consider accounts that integrate seamlessly with popular accounting software like QuickBooks or Xero, which can further streamline your financial management processes.

By understanding the basics of business bank accounts, identifying your specific banking needs, exploring promotional offers, and assessing digital banking capabilities, you can make an informed decision when choosing the right business bank account for your business.

Consider customer support availability

If you value in-person support, choose a bank with accessible local branches. Alternatively, ensure the bank has efficient phone or online customer service, so you can quickly resolve any issues that arise.

Compare monthly fees and charges

Post-introductory periods, banks may impose monthly fees, though some offer fee-free banking, charging only for additional services. Typical monthly charges range from £5 to £25. Reviewing these costs upfront can help you avoid unnecessary expenses.

Check for free everyday banking

Some banks offer extended fee-free banking periods for new business customers. However, be mindful of potential conditions such as minimum balances or transaction limits, which could lead to unexpected charges after the introductory period.

Assess transaction limits

Many banks impose limits on cash deposits and transactions within a specific period. If your business processes a high volume of transactions, choose an account that accommodates your needs without additional fees.

Explore business savings accounts

If you’re looking to earn interest on surplus funds, consider a bank that offers a business savings account. Options include instant access savings for flexibility or higher-interest accounts that require advance notice for withdrawals.

Take advantage of perks and rewards

Some banks offer cashback on bills, high interest on in-credit balances, travel insurance, or cash bonuses. These perks can provide additional financial benefits, making certain accounts more attractive for long-term use.

Final thought: build a strong relationship with your bank

A reliable banking partner provides more than just an account—it offers financial guidance, support during challenges, and tools to help your business succeed. Choose a bank that understands your business needs and can grow with you.

When opening a new business bank account, it is crucial to select a bank that aligns with your business goals, arrange necessary meetings, and prepare essential documents.