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How do business accounts work?
A business bank account basically works like a personal one – the main difference is that it’s dedicated to your business’s finances. You should therefore expect the same features, such as a debit card, the ability to make and receive payments, an overdraft option, a banking app and so on.
However, business accounts can be a bit trickier than personal ones.
First of all, the fees are often higher. You can get yourself a free current account pretty much anywhere, but it won’t be as easy for your business. Secondly, there are more options and different ways of approaching business banking, so the best deal for your business will largely depend on what your business looks like. But no worries, we’ll help you figure out how to approach this particular problem.
Things to consider when applying for a business account
Before kick-starting your research, you should think of what your business needs and why. Best deals and options vary accordingly, so try to consider the following:
- Business type. Sole traders, startups and charities, for example, can often get dedicated account options and deals.
- Annual turnover. Over a certain amount, the bank might want to talk to you to negotiate a bespoke solution.
- Usage. Many bank accounts charge a monthly fee with free transactions, but some have low or no fees with per-transaction charges.
- Cash. Some banks don’t offer cash deposits, and when they do, there may be extra fees. If your business handles a lot of cash, consider this when comparing accounts.
- Ways of banking. Whether you’re a tech-savvy person who likes doing everything on your smartphone or rather talk through your options in person, don’t forget to check whether it’s a digital-only bank.
- Trading abroad. If you often receive or make international money transfers, or you travel a lot for business purposes, you need to be careful with the extra fees many institutions charge.
- Related products. Are you just looking for a current account, or do you also need a savings account or a credit card? These things aren’t necessarily related, but having them all with the same financial institution may save you some bureaucratic hassle.
How to compare business bank accounts
Once you’ve got your needs clear, you’re ready to start looking. Here are some of the parameters that can help you with your comparison:
- Fees. Free business banking isn’t really a thing, so how much is it going to cost you?
- Introductory offers. You can sometimes get free banking for a year or two when you sign up – just remember to check what happens when the offer expires and switch if the deal isn’t worth it anymore.
- Borrowing options. Can you get an overdraft if your business needs it? How expensive is it?
- Interest rate. You won’t find any sky-high rates among business current accounts, but some banks do offer a little percentage, which can be a nice cherry on top of the cake.
- Accounting integration. It would be nice if you could manage banking and accounting from the same platform, without uploading and downloading dozens of spreadsheets, wouldn’t it? We’re not quite there yet, but some banks will offer some kind of integration with accounting software such as Xero – your finance team will like that.
- Perks. Again, don’t expect banks to be too generous with business current account customers, but some do offer some rewards in the form of cashback or discounts.
How to apply for a business bank account
The main difference between personal and business banking is in the paperwork – opening a business account will require more time, effort and documents, and in many cases you won’t be able to do it all online.
Here’s a list of the documents and information you should be prepared to give:
- Your personal details. Including three years of address history. If there are other partners or directors, you’ll also need their details.
- Your business’s details. Including address, contact details and registration number.
- Financial information. Annual turnover, how much money you plan to pay into the account, tax status, sources of income.
- Information on other financial arrangements. Such as existing credit cards and loans.
What are the benefits of opening a business bank account?
Separating business and personal banking is a necessity for anyone who owns a company. Not sure why exactly you should open a business bank account? Here are some of the many reasons:
- All your business transactions are separated from your personal ones which makes your business accounting records more organised.
- Some banks have mobile apps so you can check your records and make business payments anytime you want, anywhere you are.
- You can set up standing orders for business expenses. No need to worry about not paying on time anymore!
- You can pay your employees easily.
- If you’re a small business owner, you may be able to enjoy a free banking period for some time.
- From insurance to coffee supplies, some banks offer discounts for products and services that you may find useful for your company.
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We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.
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