How to choose a business bank account


Business banks fall into two categories:

  • logo High Street
  • logo Challengers

As you would expect, the High Street category has the names you’d know: HSBC, Lloyds, Natwest, Barclays etc. Whilst they are names you will know and probably trust, they have two main drawbacks:

  • logo No business managers at branches. Which means no one to ask questions if you need help
  • logo Only City branches will have appointment only availability.

When you start to grow, it can be difficult to have a conversation with someone who has been with you since the start and knows your business. When making application for loans or finance, you will be pitching to a stranger from scratch.

The challenger banks are the more forward-thinking ones who are here to provide the support that the high street banks can’t. These are the likes of Metro Bank and Starling.

Let’s take Metro Bank as an example. They are a community bank which means they are locally owned and operated and tend to focus on the needs of the businesses and families in the areas they operate. They have longer opening hours (7 days a week in this instance) and you actually have access to a business manager that cares about you and your business. That’s their model after all!

The thing is, we can’t tell you which one is better for you as that depends on so many things. What we can do however, is try to give you enough information across the board to make an informed decision.

Bear in mind that no bank will give you advice. All they will do is try to sell to you. So, you need to know what you want.

There are two types of accounts that you can open, a current account and a reserve account. You can actually have two reserve accounts, but we’ll get to that later.

Current accounts are your day to day accounts where your clients will pay into and you will pay suppliers from. This one is fairly straightforward.

The other type is a reserve account. This generally has two uses:

  • logo To deposit savings, profits or save for tax bills
  • logo As a VAT account.

The 1st point is quite simple and the most used for start up businesses. Don’t forget, you need to save for tax!

The 2nd is for when you become VAT registered. Don’t forget VAT is not your money. There are some big fines if you don’t pay your VAT bill so make sure you put it all into your reserve account.

All banks really don’t like cash. They will charge you for cash deposits. Online payments are the preferred method.

And don’t forget that a bank is a business. You can negotiate their charges! They make their money through these charges and from lending, so business overdrafts and loans.

Treat them like you would any other negotiation. You have options, make sure you get the best deal.

The first question you should really ask yourself is what facilities you need for your business. How will you use your business bank account? Will you be making cash deposits? Standing orders? Direct debits? Bank Transfers?

Will you need a debit card? Credit Card? Cheque book? An overdraft? Do you want to use telephone banking or online? Or do you want to bank in person?

Are you happy to pay bank fees per transaction or do you want a fixed monthly cost? Do you want your account linked to accounting software like Quickbooks or Xero?

There are so many questions that you need to answer but only you can answer them. Think carefully about how your business will trade and one that ticks all your boxes.

When looking for a new banking supplier, ask all of the questions you need to and gather all of the information before making the decision on the best fit for you and your business.

Remember, it’s not an option to not have a business bank account. It’s not compliant to trade a business through a personal bank account. Plus, if you had an inspection from HMRC about your business, they can only ask for your personal banking history id they suspect fraud, and if you don’t have a business bank account… They have access to everything.

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