When it comes to forming a limited company, one of the key decisions you face is choosing the best bank account to support your business. With so many other things to think about, you may simply opt to stick with the devil you know and choose the same bank where you hold a personal account, but not all business accounts are created equal. So, how do you find the bank that’s right for your business?
Do you need a separate bank account?
If you are setting up a limited company, you do need to open a dedicated account for your business, as there’s a legal requirement to keep your personal and business finances separate.
What are banks offering?
Your own bank may be keen to set up a business account for you and may in fact offer the best service, but you owe it to your new venture to at least see what other banks have to offer before agreeing to go ahead. This may seem an onerous task, but you can go online to find out just about everything you need to know. Also, check out some forums and ask around your business contacts to see what people have to say about the banks they do business with.
Be wary of initial offers
Most banks offer a range of enticements to attract new business customers, such as an initial period of free banking, free business advice videos or software, but what really matters is what fees they will charge once the free period is over. Switching bank accounts later can be unsettling and a painful process, so always take the long view when it comes to choosing a bank.
Rates and charges
Some banks will levy a monthly fee for business account and others won’t, instead charging you for paying in cash and cheques. Depending on your type of business that could be a significant cost. You should also compare interest rates, both in terms of what the bank charges for business loans and what, if anything, they offer on current and deposit accounts.
Depending on how you’re financing your business, you may be considering a business loan, either now or sometime in the future. Again, it’s worth thinking ahead and comparing what each bank’s terms are for overdrafts, and what their lending criteria are, as these can vary widely from bank to bank. Just how business-friendly does each bank appear?
The more you can do online without having to go into a branch, the fewer charges you’ll end up paying, plus you’ll save time as well. Look at what each bank offers in terms of web-based services and how this can facilitate the flow of money in and out of your business.
The personal touch
The rate of branch closures in the banking sector has been exponential in recent years and shows no sign of slowing down, so if you prefer to do your banking in person, you may be limited for choice. If possible, you should always seek an appointment with a business accounts manager to get a feel for how they do business with small limited companies like yours. And, even if you do plan to do everything online, it’s always helpful to have a contact name in case something goes wrong, or you have a query.
If your business trades with overseas customers, make sure your bank has a good understanding of how this works. If you do a significant amount of business overseas or complete multiple foreign transactions, it’s important your bank of choice offers ease of finance and a timely service, without levying excessive charges.
Specialist business banking deals
Some online companies offer highly competitive terms and speed and ease of set up compared to high street banks. Services can include receiving bank transfers and pay-in cash and setting up direct debit and standing orders for free, and registering your account for merchant services and with HMRC. On the other hand, you won’t be able to process cheque payments or make international transfers with this type of company.
Setting up as a professional contractor
If you’re a contractor, make sure your bank understands what services you offer and who your clients are, although most banks are familiar with how contractors operate. You are unlikely to be asked for a business plan, but you will need to provide your certificate of incorporation when you set up your account.