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Guide to business accounts

One of the first things any business needs to tackle is its banking. Cash flow is the lifeline of every business, for this reason business owners need their account to be flexible, convenient, and where possible, cheap.

The type of account that a business requires will depend on its needs and how the business operates. While the most obvious choice is a business bank account, some might require a merchant or foreign currency account.

However, business banking is about more than just the bank account’s features, the relationship the business owner has with the bank is equally important.

Here are some helpful tips to ensure you get the most out of the bank and choose the right account for your business.

Businessman at Liverpool St. station

Types of business accounts

The majority of businesses will need a business current account. This type of account deals with typical daily transactions, payments and receipts. Some will also offer interest on in-credit balances, but this isn’t always the case.

If it doesn’t and your business has cash that isn’t needed for daily operations, but can’t be locked away in case it’s needed, an instant access savings account might be best. This will ensure your money is working for you while you don’t need it.

Surplus funds that won’t be required at short notice should be kept separate in a savings account, as the more notice you’re willing to give for withdrawals, the better the interest rates.

Do you operate overseas? You might also need a foreign currency account if you receive or make payments to international clients, customers, and suppliers.

If you’re planning to accept debit and credit cards online or in-store, which most businesses do nowadays, you will need a merchant account as well as a business current account.

What charges are associated with business banking?

Most business bank accounts charge a monthly or annual fee, but many will offer up to two years’ free for start-ups or new customers. However, that’s not the only charge businesses have to contend with, as many accounts also have direct charges for common transactions, such as paying in and withdrawing cash, transferring money, or settling bills.

It is important to assess your needs to establish whether it would be worthwhile to pay a higher headline rate, for cheaper or free transactions, or to pay for individual transactions in return for a lower monthly or annual fee.

Regardless of any freebies, it is still important to compare the tariffs for when the introductory period has expired.

What facilities do banks offer businesses

At the most basic level, a business account should enable you to deposit and withdraw money, pay bills, and manage cashflow. While this covers the essentials, a modern business usually needs more from their bank.

Business borrowing from UK banks

At some point, your business will need to borrow money. Whether it’s a start up loan to get your idea off the ground, an overdraft to manage cashflow, or a credit card for capital purchases, your bank will likely be the first point of call. It’s important to know what credit facilities are available to you, and how much they will cost the business.

Accessing your business bank account

These days, it would be unthinkable to not have online banking. This immediate and 24/7 access is essential in the fast-paced world we live in. It will give you the ability to monitor income and expenditure much better and save hours and hours of time wasted in the branch.

Personal bank accounts for business?

If you are a sole trader, you are not legally required to open a business bank account. It is recommended, as it gives you an opportunity to separate personal and business finances, but you could do this with two personal current accounts. Limited companies or LLPs must have separate business bank accounts. While on the topic of personal banking, don’t feel obliged to open an account with the same bank you use for personal finances. You may be able to find a more appropriate account or better deal elsewhere.

Getting the best banking deal for your business

Take the time to get a complete overview of the market and choose the right account for your business.

It is probably best to start with the major high street banks, but that’s not to say that smaller banks or building societies can’t meet your needs too.

Whilst it is important to consider the fees and charges, particularly for start-ups, there are other deciding factors too, so your business needs are met to the fullest.

In order to get the best account for your business, you should compare several banks to see what they can offer.

Other bank support for your business

Start-ups and small businesses should always opt for an account that provides an account manager. Advice and support from someone with business experience is incredibly valuable for most businesses, so always find out if the account offers a dedicated manager.