New Business Bank Account

Which bank account is right and how do you tell the difference?

Opening a New Business Account


If you are operating a business, you need a business bank account. A dedicated bank account for your business helps manage money flow for your business and for depositing payments as well as paying employees and suppliers. The account may also be used for drawing out petty cash and completing other business-related financial transactions. A business bank account also helps separate personal finances for sole traders. A business account also helps with tax calculations and offers avenues to access financing and other supports.


Type of Business Accounts


Regardless of what business account you open with an account with a bank in the UK, a business will need a UK address. Some banks may also restrict business accounts to individuals over the age of 18. Having bad credit could also hinder applications for a business account. The best business accounts offer low charges and reasonable rates of interest, as well as online banking for 24-hour access. Certain accounts may not be available for companies with large turnovers, in which case tailored services are provided.


Current accounts are designed for day-to-day banking. They are straightforward and simple to manage, and typically have a fixed monthly fee that covered all standard banking activities. Fees are generally based on the cash deposited each month, with higher fees for larger deposits. Day-to-day banking services covered by a current account typically includes depositing and sending cheques, withdrawals, direct debits, standing orders, bill payments, debit card payments, and cash deposits. Some current accounts may have daily transaction limits.


Business savings accounts provide accesses to money while earning interest on account balances. Typically, a minimum balance is required. These interest-bearing accounts are designed to earn money without locking funds in a term deposit or other type of investment option. Banks offer a range of savings account options with higher rates of interest, particularly when withdrawals are not made from the account. Some savings accounts are also linked to a fixed rate bond that provides a guaranteed return on savings.


Banks offer a range of financing options, including overdrafts, loans, commercial mortgages and asset finance. Overdrafts are ideal for short-term financing and allow businesses to get quick access to small amounts of funds to improve cash flow. Some banks offer greater flexibility with negotiable overdraft rates. Loans are designed for additional financing, especially for growing a business. Repayment is within a fixed term, typically between one and give years. Loans are typically provided with fixed rates. Certain banks may also offer access to loan and financing schemes backed by UK government and the European Union. For larger amounts, banks also offer commercial mortgages and are available with fixed or variable rates and terms. Asset finance is a borrowing solution for leasing or buying equipment, including vehicles.


For companies that do business abroad, banks also offer foreign currency accounts. Foreign currency accounts are ideal for businesses that import or export goods to other countries. These accounts make it easier for businesses to do transactions with partners, suppliers, clients and customers abroad where transactions might be made in U.S. dollars, Japanese yen, Euros, or other another currency.


Banking Services for Businesses


Before opening a new business bank account, it is important to consider support services offered by banks to businesses. These types of services can assist with business planning and periodic reviews, as well as provide important advice on how to start a business, expand operations or access new markets. Most banks in the UK offer dedicated business support services for account holders. Business bank accounts typically provide access to business specialists at local branches. These advisors are available to provide information about business planning and other related guidance. Banks also offer a range of financing and borrowing options that help businesses improve cash flow and expand. Most banks give businesses a range of banking options, including internet, mobile, telephone, text and branch banking.


For businesses with large turnovers, banks provide dedicated relationship and account managers with commercial expertise. Many of these managers will also have international experience and knowledge to help with businesses engaged in activities in markets outside of the UK. Most UK banks offer these services for businesses with a high turnover. Relationship and account managers for businesses are either locally-based or based at a central office. Local managers will be available for face-to-face meetings, while all managers work with clients by phone or email. Relationship and account managers provide customised advice, deal with complex queries, and can complete a business review and assist with planning.


Choosing a Business Account


When choosing a business account, consider the various banking facilities and services provided by the financial institution. For example, confirm whether you make deposits in both cash and cheques and if withdrawals can be made at cash machines and branches. Confirm that the bank has a night safe for depositing money outside of regular banking hours. A business account should also allow for direct debits and credits, as well as company debit and credit cards. Many banks also provide customised products, including business chequebooks with your company logo.


Considering the types of services, financing and borrowing products offered by the bank is also important, including the types of business loans and mortgages available. Businesses should consider all associated fees, terms and conditions for available financing and borrowing options since they vary between financial institutions. Major banks also offer insurance cover for designed especially for businesses and commercial operations, as well as cover for business financing and borrowing products. Most banks also offer introductory offers to start-up businesses that include fee-free banking for one or two years.


Resources


The TIS Business Account overview provides information on the most commonly offered services. The British Bankers' Association (BBA) provides independent information for business banking and business accounts. The BBA also has an online business account finder to help businesses compare accounts, find introductory offers, and obtain full details about various accounts offered by banks.


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