Choosing the Right Bank Account for Your New Business in the UK
Setting up a new business is an exciting journey, but it also comes with a lot of decisions!
One of the first and most crucial choices you’ll make is selecting the right bank account for your business.
A good business bank account isn’t just a place to keep your money; it’s a vital tool that can help you manage finances, streamline operations, and even grow your business.
So, what should you consider when choosing a bank account in the UK? Let’s dive in! 💼
What Type of Bank Account Do You Need?
The first question to ask is whether you need a business bank account or if a personal one will suffice.
While sole traders might technically use a personal account, it’s usually best to separate business and personal finances for clarity and to simplify accounting.
For limited companies, a business account is a legal requirement.
This separation also helps maintain professionalism and can make things easier come tax time.
What About Fees and Charges for Business Banking?
Different banks offer different fee structures. Some accounts come with monthly fees, while others might charge per transaction. It’s crucial to consider:
- Monthly maintenance fees: Some accounts are free for an initial period but then charge a fee.
- Transaction charges: This includes charges for depositing cash, issuing cheques, or making electronic payments.
- Overdraft and lending rates: If you anticipate needing an overdraft or a loan, compare the interest rates and terms offered by different banks.
Remember, the cheapest option isn’t always the best. You need to consider the overall package and how it suits your business needs.
However thankfully the smallest of businesses can now take advantage of a raft of online only ‘challenger banks’, many of which offer free business banking for life.
These include Mettle, Starling Bank, and Monzo amongst others.
What Features and Services are Available for Business Banking?
What do you need from a bank account?
Some businesses may require advanced features, while others may need only the basics.
Consider the following:
- Online banking: A must-have for most businesses. Check if the bank offers a user-friendly app and robust online services.
- Integration with accounting software: This can save you a lot of time and hassle, especially if you use software like QuickBooks or Xero.
- Cash handling facilities: If your business deals in cash, look for banks that offer convenient cash deposit options.
How Good Is the Customer Service?
Good customer service can be a lifesaver when things go wrong or you need quick assistance.
Look for banks with a reputation for excellent customer support.
You might also consider whether you prefer a bank with local branches or if you’re comfortable with an online-only bank.
What About the Extras?
Some banks offer extra perks that can be beneficial, especially for new businesses. This could include:
- Free business advice and support: Some banks provide access to business advisors or exclusive networking events.
- Introductory offers: Many banks offer free banking for the first year or other special promotions for new businesses.
What About Interest Rates and Other Options?
Interest rates are another factor to consider when choosing a business bank account.
While standard business current accounts don’t usually offer high interest rates, some do provide tiered rates that increase with your balance or if you’re interested in earning more on your deposits, look into business savings accounts or fixed-term deposit accounts.
These options can offer higher rates but may come with tie-in periods, meaning your money is locked in for a certain period.
It’s crucial to weigh the benefits of earning higher interest against the need for liquidity. Make sure you have enough accessible funds to cover your daily operations.
Also, be aware of any penalties for early withdrawal from fixed-term accounts.
Understanding these details will help you make an informed decision that suits your business needs.
What’s the Process for Opening an Account?
Finally, consider the ease of setting up your account. Some banks offer quick online applications, while others may require you to visit a branch.
Check what documents you’ll need, such as your business registration details, proof of identity, and address.
Conclusion
Choosing the right bank account for your new business is an important step that can impact your day-to-day operations and long-term growth. Take the time to compare your options, read the fine print, and choose a bank that aligns with your business needs.
Remember, it’s not just about where you keep your money; it’s about finding a partner that supports your business journey.
For more detailed advice on managing your finances, have a chat with The IN TEAM, who will be happy to help.
Good luck with your new venture! 🚀
