What to consider before opening a business bank account

Having a business bank account comes with a number of benefits such as introductory offers, online banking and access to finance. One of the main advantages is the ability to keep your business expenses separate from your personal account – and making this information more accessible and easy to organise when doing your accounts and returns for the HMRC.

There are a lot more options for business bank accounts today than there were 10 years. With a number of new challenger banks such as Revolut, Monzo, Tide and ANNA, gaining attention over traditional banks, there are now a number of things to consider before opening a business bank account.

“Choosing a business bank account is one of the most important decisions a business has to make,” according to Nic Redfern, Director of Know Your Money. No longer a straightforward choice between the high-street brands, businesses can also select from a range of challenger banks which each offer their own benefits.”

“Every banking provider and their accounts are different, with different fee structures, features, and mobile apps, so choosing the right account for your business needs can make it easier to manage your finances in the future.”

Do you want to pay monthly fees?

The majority of business bank accounts come with an introductory offer of no charges for a period of 6 to 24 months.

However, this usually increases after the introductory period of around £5 to £25 per month – although you can find some business bank accounts that offer no fees every month, provided that you pay a minimum amount into the account each month e.g.: £750

Whilst the fees are quite low for any growing business, some business owners prefer look to have zero fees each month – or wish to keep a business bank account in the background for the future launch of the business.

Whilst a lot of challenger banks such as Tide and Revolut do not charge any monthly fees, there are some downsides with these kinds of accounts, since they currently do not offer loans or overdraft facilities (at the moment) and this could be vital for your business.

 High Street BanksChallenger Banks
Monthly Fees£5 – £25 (with free introductory period)No, but have paid premium versions
Online BankingYesYes
Overdraft FacilityYesNot currently
FX fees and ATM feesYesNo

Do you need an overdraft facility?

An overdraft allows you to borrow a fixed amount each month for your business and for some companies, the extra financial cushion can be essential to maintain a healthy cash flow.

Traditional banks like Natwest, Barclays and Santander will always offer an overdraft facility (charged with interest) and the amount you can borrow will depend on your company turnover, credit status and repayment history.

However, many challenger banks do not offer an overdraft facility – so if this is something that might be important to you, it might be worth swallowing the monthly fee of £5 or £6 per month and choosing a business bank account on this basis.

Do you send money or work abroad?

Challenger banks have gained traction over not charging FX fees or ATM fees when taking out money abroad – something that high street banks will charge for.

If you are regularly sending money abroad for business expenses or withdrawing money when working in other countries, it is worth checking the fees that apply and basing your business bank account on this.

Will you need loans and finance?

If you bank with a high street bank, you will usually get quicker access to business loans and finance from that particular provider and get preferred rates as one of their customers.

Other perks include having access to a business manager from a local branch, business grants, networking and mentoring.

With challenger banks, they typically do not offer any extra finance or loan options, although this is something that is likely to be introduced over the coming months or years.

Read more: What to do if your business bank account is closed down

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