5 things to consider when choosing a business bank account
Posted on the 7th January 2016 by Alex Garbutt in SME blog
Whether you’re setting up a new business or looking to switch providers, here are the top five things to consider when shopping around for the best business bank account.
In October the Competition and Markets Authority announced that not enough businesses shop around for the best bank account. Over 50% choose the same bank that provides their personal accounts and are losing money as a consequence. However choosing a bank account for your business can be a slow and laborious process, not least because it’s difficult to compare the pros and cons of each. So what is the “best business bank account” for you?
Looking at the offerings from the different banks will take some time, but will undoubtedly pay for itself in time and money in the future. So, to give you a head start, we’ve compiled a list of the top five things to consider when looking for a bank account for your business.
1. Introductory periods
Most banks will offer you preferable terms for the first couple of years. While it’s good practice to be aware of what they’ll be charging you after this initial grace period, don’t be afraid to take advantage of these offers. Your business could be in a completely different place in a couple of years and, because the type of account you are offered will likely be based on company turnover, you may well have moved products or providers by the time the standard rates kick in. But always check how easy it is to end close your account.
2. Fees and charges
The small print can be quite complex, but always try and make sure you know what charges to expect for your most common activities. Things banks tend to charge for include:
- Accepting card payments from customers
- Fixed, standing charges for the privilege of banking with them
- Transaction charges for handling money coming in and out of your business bank account
- International payments (say to suppliers or repatriating revenue)
- Overdraft fees
So make sure you know what you might need from your business bank account
3. Can you do everything you need to online or on mobile via smartphone?
The popularity of online and mobile banking is skyrocketing. A recent report mentions a HSBC customer carrying out a mobile transaction valued at $1.17 billion! You might not be making billion dollar payments (yet) but it represents the confidence in virtual banking systems. Not only is banking online quicker than driving down to your local branch, it’s also cheaper. As a general rule, the more you can do online the fewer charges you’ll pay.
4. Banks, unlike dogs, aren’t for life
With over 50% of individuals choosing their business bank account provider based on who their personal provider is, it’s safe to say there is strong brand loyalty in banking services. That’s not to say this is a bad thing - it’s great to be comfortable and happy with a provider - but remember, when it comes to your business, banks are suppliers of services and not your partners. Don’t be afraid to move to get a better deal or if you’re getting a sub-par service.
5. Use different providers for different services
Traditionally, your bank has been able to take care of all your financial service requirements whether it’s a business loan, current account, invoice financing or international payments. However, with the rise of challenger banks and financial technology companies, there are now lots of specialist providers.
Certain products can often be offered by specialist providers at a lower rate and with a better service than your bank, for example:
MarketInvoice offers bespoke invoice-financing services
Funding Circle is a leading marketplace focused on small business loans
Money Mover provides a feature rich platform for business to make international payments
Once you’ve narrowed down your choices, it is always worth speaking to the banks involved. This will give you a better feel for the bank, the kind of service you’ll get and if they’re the right fit for you and your business.
If you've had a great experience getting a bank account set up for your business, or you want to people know who to avoid, then leave a comment in the section below.
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