Business bank accounts FAQs
There are significant differences between personal bank accounts and business bank accounts.
The following frequently asked questions (FAQs) may help to reveal those differences and explain how you might choose a bank account for your business.
Do I need a business bank account?
Your need for a business bank account is dictated by the practicalities of doing business rather than any strict legal obligation.
If you are a sole trader, you may have been managing to keep your personal and business finances separate while continuing to use your personal bank account. Your bank is unlikely to welcome the practice and will urge you to open a business bank account.
If you are running a limited liability company, on the other hand, your business is a separate legal entity. That makes the merger of your personal and business finances practicallyimpossible to manage without one while you keep the affairs of your company separate from your own personal finances.
In the case of a limited liability company, in other words, a business bank account is effectively essential.
Who offers business bank accounts?
In recent years’, the number of banks offering business bank accounts has mushroomed. And, a combination of technological advance and the demand for internet-based, mobile banking apps, has stimulated the growth of even more “fintech” banks. These so-called “challenger” banks now claim some 35 million customers, according to an article in Fintech News on the 30th of November 2019.
How do I choose a business bank account?
The “challenger” banks may have taken the industry by storm but the established high street banks – the so-called “legacy” banks – continue to operate in this highly competitive market.
The sheer proliferation of banks may leave the business customer overwhelmed by choice.
To help you navigate those choices, compare the offering from a host of different providers, and make realistic comparisons, therefore, you might want to use a comparison website to explore what business bank accounts are currently on offer.
Are there advantages between “challenger” and “legacy” banks?
The principal advantages offered by challenger banks are that:
• operating entirely online, there are no physical offices or branches to maintain – and those cost-savings may be passed on to customers through lower charges and more competitive services;
• challenger banks are typically in the forefront of technological change and more likely to offer the convenience and responsiveness of app-based mobile banking; and
• it is typically much quicker to set up a business bank account online than the several days it is likely to take a high street bank – since the latter invariably conduct credit checks on the financial standing of your business.
Challenger may offer real-time chat facilities online to answer the more basic questions about your business bank account. Although many challenger banks offer a full range of financial services, their scope is likely to be more limited than the services offered by your high street bank.
If you want more in-depth advice or the opportunity for a face to face discussion on the future of your business, you may feel that a business account at your high street “legacy” bank is the better bet.
Plus, if you are a cash business, the ease and convenience of dropping off your takings at your nearest high street branch may appeal to you.
Each type of bank has their own benefits – so when choosing your business bank account, it is imperative you base your decision on the service that will most suit your needs.