What to look for in a business bank account

Of course, you want your business to do well. Its success is likely to depend on a whole host of decisions you take about the way it is run. And one of the most fundamental decisions is the business bank account you choose.

When you started out, you might simply have used the bank at which you did your personal banking. As your business grows – and especially if you take the next step towards incorporation as a limited liability company – your enterprise takes on a separate and distinct legal entity demanding an even cleaner break between your personal and business banking.

So, you need to examine the particular needs and requirements of your business and choose between the many types of business account that are available today. What do you look for to inform that choice?

Setting up your business bank account

As you cast around for a suitable business bank account, one of the first things you are likely to notice is the presence not only of the familiar high street banks but a growing army of so-called “challenger” banks which often lead the way in terms of internet and app-based mobile banking.

If you choose one of the former “legacy” banks, you may need to visit the branch, fill out a few forms and wait until your identity is confirmed, a credit check has been made, and the account is opened after waiting a couple of days.

Setting up a business account with an alternative app-based bank is likely to be much quicker – as fast as just a few minutes – largely because no credit check may need to be made.

The type of banking you need

Studies last year revealed that around two-thirds of British banks have closed their branches in the last 30 years. And in 2018, over two-thirds of British adults used online banking and 48% used mobile banking.

While this suggests a trend towards more mobile banking, you may still want the ability to visit a branch. A physical branch may be necessary, for example, if your business generates regular cash income which you need to deposit easily, quickly, safely and securely.

That visit to the physical branch of a legacy bank might also be a reminder of the support you are likely to receive for your business by a manager.

Many high street banks pride themselves on the personal relationship they aim to strike with holders of business bank accounts. They make an effort to truly understand the nature of your business and the extent to which the bank is there to help and advise you. That relationship might prove invaluable to your business in future.

Online, app-based banks, of course, do not have that physical presence. What they do have, is the convenience of mobility. This often comes in the shape of a mobile “wallet” from which you can service all your banking needs while on the go.

It is your choice as to what solution most suits you.

The cost of business banking

Along with the wide range of choice in business bank accounts comes an equally wide range of fees and charges. Unlike your personal banking, your business bank account is likely to attract charges on two fronts:

• a monthly maintenance fee which is paid simply to keep your account open; and

• a scale of fees and charges for the services performed by your bank – typically based on the type of transaction, be that clearing cheques, making electronic payments, business credit card transactions, or the deposit and withdrawal of cash.

The extent to which your business relies on those services, of course determines the cost of running your business bank account – so, you may want to give careful consideration to those costs.

Introductory offers

Banks are eager for your business. To encourage you to open a business bank account or to switch from another bank to theirs, many banks have introductory offers during which fees and charges are waived for an initial period – typically, lasting from around 12 to 18 months.

While this may prove an initial attraction, remember that the costs become relevant once they kick in after that period of grace.