Keeping track of your finances when you run a small business is vital. When you first start your small business, you might find it easier to use your personal bank account for your business. However, there may come a time when a business bank account will be more suitable.
But how do you know when you need a business bank account? And how do you know which one to choose? This guide has everything you need to know to get your finances in order.
Do I Need a Business Bank Account?
A business bank account is an account used solely for your business transactions. You’ll receive business payments into this account instead of your personal bank account and use it to track your expenses.
If you’re registered as self-employed, there’s no legal requirement in the UK to have a business bank account. However, having a separate business bank account can make keeping track of your profit more straightforward, especially if you handle a lot of transactions.
If you run a limited company, you must open a business bank account by law. Once you have a business account, you’ll be able to access financial support like business loans.
What to Look For When Choosing a Business Bank Account
All the major UK banks offer business banking tools, but digital banks like Starling, Monzo, and Tide also provide business bank accounts. Each account will be slightly different, so you’ll have to understand your priorities before you make your choice.
Here are some of the main things you need to consider when choosing a business bank account.
Fees
While it may be free to open a business account initially, you should be aware of any fees that apply on transactions after your ‘newcomer’ period is over. Fees will change depending on whether you are using cash or online payments for your business and how much each transaction is.
Overdraft
Does your business have challenging cash flow issues? Then an overdraft might be your top priority. However, having an overdraft attached to your business bank account will usually cost you, and you may have to pay interest if you’re late paying it back.
Transaction Limits
If your business is still getting off the ground, you probably won’t need to consider transaction limits. However, if you’re growing quickly and need your business account to handle large cash deposits or e-payments, it’s worth checking whether you’ll have to pay any fees.
Our Advice
Opening a business bank account is a big step, but one that can easily take your small business to the next level. Business banking will help you to organise your business finances and make your company seem more legitimate to clients.
However, you should do careful research before committing to a business account. Many banks will also complete a credit check before they open your bank, so if you have a bad credit rating, it’s worth looking for a bank that assists people with poor credit history.
