“A journey of a thousand miles starts with a single step”, as the philosopher Lao Tzu said. But that first step is also one of the hardest to make, because we have to overcome our inertia. Perhaps this explains why over 90 per cent of SME bosses get business loans from the bank where they hold their current accounts, and don’t look around for better deals.
As such, it’s no surprise that firms are paying on average over £2,500 a year in fees and charges, according to the Federation of Small Businesses. What’s more, the best business deposit accounts can pay more interest than the worst offenders so there are real incentives for businesses to switch accounts. So how do you approach finding the best products for your needs? Here are ten essential tips.
(1) Shop around
Many stick with the bank that they’ve used or choose an account that has a good top line or bonus. Opening a business account with your personal banking provider doesn’t entitle you to the best deals, so shop around before you commit. Not sure where to start? Use comparison sites and follow reviews to find the best deals for you.
(2) Don’t be swayed by a bonus
Bonuses often mean the rate will only last for a certain amount of time before it falls, and usually by a considerable amount. That being said, using an account with a bonus isn’t necessarily a bad thing. Depending on the get-out clauses on the account, you may be able to take advantage of the bonus rate then switch.
(3) Don’t be swayed by the headline rate
As above, the headline rate doesn’t always tell the full story. Some banks add transaction charges for certain things like transfers or withdrawals which can make a good headline rate worse in the long run. If you’re not sure, use online calculators to see how your typical transaction levels such as monthly direct debits, standing orders and cheques may impact your costs.
(4) Set a savings goal
Small businesses often have the goal of just “staying afloat” – especially in their early days – but that doesn’t mean that you can’t have a goal in mind. It could be that your business is saving to employ more staff, or enough to pay the bills on a rainy day. Whatever the reason, having a goal can help keep you motivated and scrupulous with your savings.
(5) Savings vs current accounts
Knowing the difference between a savings and current account is one way to ensure that your money is in the best account possible. In some cases, current accounts or business bank accounts offer little in the way of interest but make up for it with perks like insurance, overdrafts and easy access money. Savings accounts and business savings are normally higher interest as they are often fixed over a period of time, but think about how often you’re going to need access to your money before you tie it away for a long time.
Continue reading to make the most of Owen’s banking advice.
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