Which bank is the right one for my business?
Choosing the right bank for your business is not something that should be undertaken lightly. Good business banking is about establishing a partnership between your company and the bank you will be joining.
A bank can not only offer your business basic account services but has the potential to offer your business real value in the form of advice on growth strategies, provide you with funding and introduce you to key contacts.
Ideally you should select a bank that you feel your business can grow with. There are a number of things you should consider when looking at opening a bank account for your business.
Types of current accounts
Commercial Current Account. This is the primary reason you open a commercial bank account. It is essential to your business as a current account will allow you to make and receive payments. If you own a small business there is a possibility that you will be a limited company and therefore should have a business account, however, depending on the size and nature of the business (for example, a sole-trader) you should probably question whether or not this is absolutely necessary as many banks will allow you to conduct business through a personal current account.
Savings Accounts. Just like personal savings accounts it is advisable to have a commercial, easy access savings account in which to place surplus funds as well as for emergency and tax purposes.
Sweep Accounts. Sweep accounts allow business owners to invest in a small way on a regular basis. They can be very useful as they allow you to move excess funds back and forth between the current and investment accounts without you needing to get involved in the process. In the majority of cases, you can enjoy access to your funds on the same day.
The sweep account forms a line between an investment account and a current account and ensures that the balance in the current account is at a minimum preset target level. This kind of service ensures that the small businesses enjoy higher returns on cash rather than sitting in commercial current accounts as they do not have a huge capital or the time to enjoy the benefits of highly lucrative investments.
International requirements
International Requirements. International offerings by banks include dealing with IBAN (International Bank Account Numbers) and assist in general trade over-seas.
With communications technology becoming more advanced through the introduction of the internet, wireless and mobile communication the world has, in effect, become a much smaller place as it’s opened up a global market that small business owners would not have previously had access to. However, this is not the case in every business and many small business owners will still trade regionally or nationally. So it’s really down to you to decide whether or not your business really needs this.
Payroll services
Payroll Services. Is it easier for you to outsource your payroll or would you prefer complete control over this part of your business?
Banks such as Barclays are currently offering to manage the payroll system on your behalf – to take away the hassle. Outsourcing your payroll can help you cut costs on many levels, such as I.T., software investment and management costs.
However, keeping the payroll in-house gives you the ability to access employee data quickly and many companies do not tend to trust other organisations dealing with sensitive employee information.
Bank charges and loans
Bank Charges. The fees banks charge for their services can make a big difference on their compatibility with your business. While small fees may not seem significant, over time they can really add up.
Never assume you know what banks charge simply because you understand their policies for personal bank accounts. Don't be afraid to reach out to the community and ask other small business owners about their experiences with any banks you are considering. Personal banking experiences can sometimes be more informative than anything you could find on paper.
Commercial Loans. Just how easy is it to secure funds for your business from the bank? This is a very important question if you are relying on a start-up loan for your new business over other kinds of investment – such as taking on partners and share-holders.
However, if you do plan to take out a loan you should ensure that you’ve not only researched your business idea enough, to ensure its viable long-term, but have also budgeted for everything you plan to spend the loan on. It’s strongly advisable to shop-around when looking for a business loan as APR (annual percentage rate) differs from bank to bank and you could end up paying back exorbitant amounts of interest accrued over time.
Commercial Credit Cards. Business credit cards allow you to administer and manage your business expenses while getting rewards for the business purchases you make. Credit card companies are keen to earn your business, and consequently, offer special benefits and incentives, some of which designed business credit cards just for small businesses.
Before getting a card you should consider whether or not it is more prudent to get a credit card that allows you to pay off the full amount borrowed monthly or allows you to carry the balance (paying the minimum off each month). You should also question what kind of business purchases you make the most and ensure that your credit card rewards those particular purchases.
