Most individuals use the same bank for decades, if not for their lifetime. Many small businesses are the same, and stick with their high street bank even if they are missing out on far higher interest rates and lower bank charges which are available elsewhere.
Switching bank accounts is still perceived by many as being a difficult thing to do, but it is now a simpler process than ever.
What your bank must do if you want to switch your business bank account
As per the terms of Section 7 of the Business Banking Code (which you can download from this page of the Lending Standards Board website), your current bank and your new bank have a number of obligations to you when you switch business bank accounts:
Your current bank must let your new bank know about your standing orders and direct debits within 3 working days of receiving this request.
Your current account must also be closed without any unnecessary delay.
Your current bank must not make any extra charges for closing your account.
If asked by you, your current bank should pass on your credit history to your new bank.
Your new bank must tell you how the account transfer process will work, including what information your old bank will send, what features your new bank account will have (so you can easily compare with other accounts), and how long the transfer is likely to take.
Your new bank account must be ready to use within 10 working days of your application being approved.
Any bank charges which have been made as a result of a delay in transferring banks, must be cancelled without delay.
Should you switch your business bank account?
Although the process of switching bank accounts has been simplified in recent years, you should think carefully before making the change.
The benefits of switching may include: access to higher interest rates, lower bank charges and extra business services. Don’t be tempted by short-term “introductory banking offers” if at the end of the promotional term, you are no better off than you were with your previous bank.
On the flip-side: switching banks may involve a great deal of administration for your company if you deal with a large number of transactions, it may also affect the perceived financial stability of your company as suppliers of credit often ask how long you have been with your bank.
Tips to help you switch bank accounts smoothly
- Compare business bank accounts before making the move. Make sure you find out what interest rates will apply after any introductory period is over.
- If possible, keep your old and new accounts running concurrently until you’re sure that all standing orders, direct debits and other regular transfers have been applied to the new account correctly.
- Many companies have several business accounts. You may have a competitive current account with one bank and a savings account with a different bank. Compare carefully, as you could be missing out on hundreds or thousands of pounds each year in lost interest.
- Hopefully, your account switch will go ahead smoothly and in reasonable time. If you do have problems and have been unable to resolve any issues with your current (or new) bank account provider, you can contact the Financial Ombudsman Service here.
More help on funding your business
You can find lots more help and tips on all aspects of banking and funding on ByteStart. Here are a few of our most popular financing guides;
- A Guide to ‘Alternative Finance’ – the new funding options for startups and small businesses
- How to maximise your chances of securing a small business loan
- Finding finance for your new business – funding advice for start-ups
- How peer-to-peer lending offers businesses a new funding option
- 10 Top tips to ensure your crowdfunding efforts are rewarded
- The secrets of getting a business bank loan
- What are business angels and how they can help fund your business?
- Using Research & Development tax relief to reduce your corporation tax bill
And these will help you with your cash flow;
- The way to get paid – 12-Step Action Plan to stop customers from paying you late
- Cashflow Forecasting – top tips to produce a better cash flow forecast
- 8 signs that a small business may be approaching insolvency
- ByteStart’s Guide to insolvency, liquidation and bankruptcy for business owners
- What exactly are invoice finance and factoring, and what benefits can they bring to my business?
- 10 late payment excuses used by customers – and how to deal with them