How to open a business bank account – Forbes Advisor UK

Do you run a business? If so, you’ll probably need a business bank account.

Some types of businesses are required to have a business bank account, while it is optional for other business setups.

A business bank account is very similar to a personal checking account. You can deposit money, withdraw money, set up direct debits, make regular or one-time payments, and borrow money via overdraft.

This type of account may also offer additional tools to help you manage your business.

Do I need a business bank account?

You need a business bank account if you own a limited liability company, a general partnership, a club or a charity.

Independent traders can choose to use their own personal account or open a business account to keep things separate.

Choosing the right business bank account is as important as choosing the right checking account for your personal use. There are plenty of options to choose from, so it’s wise to shop around for the right match.

Which banks offer business bank accounts?

Traditionally, anyone starting a new business had to go to a mainstream bank for their business bank account.

But things have changed. While street banks are still popular with businesses, there are alternatives in the form of so-called app-only or digital-only challenger banks. These include brands such as Anna, Tide, Starling and CountingUp.

Some major banks offer business bank accounts under different brands. Natwest, for example, has the Mettle app, which offers business accounts.

What are the facilities offered by professional bank accounts?

Some features offered by business accounts are similar to those offered by personal accounts. These generally include:

  • debit card
  • discovered
  • direct debits
  • standing orders
  • interest accounts payable
  • Checkbook
  • smartphone apps
  • digital bank.

Extras offered by some banks include:

  • additional credit cards for other staff
  • business planner software
  • budgeting and expense tracking
  • invoicing software
  • a dedicated account transfer or management team
  • expert business advice
  • gadgets for contactless payments
  • integration with accounting software such as Sage, QuickBooks or Xero.

How do I find the best business bank account for my business?

Some business accounts are designed for a particular type of business – for example, start-ups, sole proprietorships, partnerships, or limited liability companies. Others require the business to be a certain size or have a minimum turnover.

When choosing a business bank account, you need to decide if a digital bank will be enough or if you want your bank to have branches as well.

Questions to ask include:

  • are there facilities to pay by check?
  • Does the bank have a dedicated corporate banking team?
  • Will you have a designated person or designated sales manager to manage your account and process your inquiries and requests?

How much do business bank accounts cost?

Many business accounts offer a period of “free” banking services to attract new customers. Although these offers can be interesting, they are not always as free as they seem.

For example, some will require you to maintain a minimum account balance, otherwise you will be charged a fee. Others will charge a fee after a certain number of transactions have been completed.

Once the free banking period is over, business customers are billed in two main ways:

  • monthly fee (normally £5 – £12.50)
  • per operation.

Alternatively, some banks charge fees based on the amount of money flowing through an account, i.e. company turnover.

Although a bank will publish its standard rates for businesses, it is always worth negotiating to try and get a better deal. Banks tend to charge more for accounts where more checks are paid or issued.

How to open a business bank account?

You should compare the offers of several banks before opening an account. When you have chosen a bank, they will tell you what documents you need to open the account.

These could include:

  • certificate of incorporation (limited liability companies)
  • Identity documents (passport, driver’s license, utility bills, etc.)
  • list of signatories who can sign company checks.

With some providers, you can open an account online or on your smartphone. With others, you may need to visit a branch, interview, and present evidence of your turnover or business history.

You may decide to open a business account with the same institution you use for your personal banking, but you should also see what other banks have to offer. There may be some reward for brand loyalty, but that won’t always be the case.

Do business accounts offer overdrafts?

Yes, you can normally get an overdraft on a business bank account. A business overdraft gives you access to additional funds up to an agreed amount that you can use as and when needed.

The amount you can borrow and the interest rate vary from bank to bank and may depend on your trading history. But beware: unlike the personal current account, your bank will have the right to demand the short-term reimbursement of any professional overdraft.

If you need to borrow money to run or grow your business, other options include:

  • bank loans
  • government grants
  • venture capital investment
  • invoice factoring.

If you have a business advisor, such as an accountant, they may be able to recommend a bank that is right for you.