One of the first things you will do when you set up a new business is to open a business bank account. The easy thing to do is to use your personal bankers to act for your new business, but this isn’t necessarily the wisest move as there are significant differences between the services you will receive from the various high street banks.
Here are some general tips to help you get the most out of your bank, and choose the best account for your start-up business.
How to choose the best business bank account
1. If your business is incorporated (i.e. a limited company, or LLP), you must have a separate business bank account. For sole traders and even partnerships, it is optional, although we’d strongly recommend opening a separate business account in order to keep your personal and business finances separate.
2. To make the best decision, you should ideally compare several banks to see what types of deals they offer, particularly to start-ups.
For example, at present, Barclays are offering up to 2 years’ free banking to start-ups and also include some use of CREDITFOCUS – their award-winning credit control service, free business seminars and free i-sure business data backup.
Whilst Lloyds TSB are looking to entice new businesses with 18 months free day-to-day banking, free Sage business planning software and a smattering of start-up support services and resources.
3. Don’t necessarily go with your personal bankers to look after your business needs, as they might fall short however good they have been to you as an individual.
4. Despite suffering from the backlash against bankers’ bonuses, many start-ups will feel more comfortable opening an account with an established high street banking name.
5. Bank charges can vary significantly between banks. Although you may receive up to 2 years’ genuinely free banking, you should find out what tariff you will be switched on to once the initial free period has expired. The effect of charges can be significant if you expect a large number of transactions to go through your account each month.
6. Although most business accounts currently offer virtually nothing in terms of interest, some banks have bucked the trend and you may be able to earn some interest on your current account balance. Put your tax savings in a higher interest-bearing deposit account to make the most our of the limited interest available to business customers.
7. It goes without saying these days that you should expect your bank to offer online business banking as a matter of course. This is a massive time saver for small businesses, and you simply won’t be able to do without it once you’ve tried it.
8. Try to find a bank which provides a dedicated small business account manager. Most high street banks offer a dedicated service, and it will help to be able to talk to someone who understands how real businesses work when you need assistance or advice.
9. Ask friends or fellow small business owners what kind of experience they have had with their banks. You simply can’t beat a personal recommendation from someone you trust.
10. If it doesn’t work out with your bank for whatever reason, you can always switch providers. Aside from a small amount of inconvenience, the switching process has been made much simpler in recent years, so you’re not tied to your current bank for life!
Some businesses will require regular contact with their bankers, so you should go with a team you feel you can build a good personal relationship with.
For more information on the practicalities of opening a limited company bank account, read our article here.