What is a business bank account?
A business bank account is a great way of storing and managing all your company’s income and outgoings. If you’re a small business owner, a business bank account helps separate your personal cash flow from that of your company. “But why not just set up your personal bank account for your business?”. Continue reading to discover:
- If you can set up a personal bank account for your company
- The features of business bank accounts
- Which documents do you need to set up a business bank account?
- How to choose a business bank account to open
- The best online free small business bank accounts
- The best international business app accounts
Can you use your personal bank account for your business?
The short answer is yes. That’s because sole traders are under no obligation to set up independent business accounts. That said, it’s a good idea to have one current account for personal banking and a bank account for the business. This will help you keep your business cash flow separate from your own.
Limited companies legally need a separate account, which should be a designated business account if possible. That’s because the company or business is deemed to be legally distinct and separate from you.
Features of business bank accounts
Most UK business accounts differ from individual current accounts. That’s why it’s worth understanding what you’re signing up for before you open your business account. For example, there might be costs involved when you open a business bank account that you may not have incurred for your personal account.
Although accounts vary from one provider to another, below are some of the features you should consider when you want to open a business account:
Providers may offer short-term rewards when you open up with them, such as international transfers, access abroad, competitive interest rates, zero-standing charges, open or online-only offers, or cashback.
Certain online business accounts charge a monthly or quarterly fee when you open a bank account with them.
These charges are made for the handling of money moving in and out of your current account. Some accounts might offer lower transaction fees for making and receiving overseas payments.
While most business accounts provide internet banking, there are some exceptions, so it’s best to make sure beforehand if it’s essential to your company.
Many business accounts have dedicated apps that integrate with other services, such as accounting and online invoicing software, once you open your account.
Debit and credit cards
You’ll usually be able to get several bank cards with the account, giving you and any staff access to company or merchant funds.
The higher interest rates that come with business bank accounts can see you get greater returns on your savings.
Some business bank accounts are online only, so it may be worth finding an alternative if this is a priority.
Some business bank accounts even offer insurance, international assistance, and support in the event of online fraudulent activity at home or abroad.
What documents do you need to open a business bank account?
Opening a bank account in the UK is a pretty simple process. All you need is all your documents in one place before you apply. You’ll likely need the following:
- Proof of your identification, like your driving licence or passport, and proof of any change of circumstances, such as a change of name or marital status.
- Proof of your address, such as an online utility payment or council tax bill, or a statement from your personal bank account.
You’ll also need the following information about your business:
- The full name of the company.
- The business’ international postal address.
- The business’ main phone number and email address.
- The business’ UK Companies House registration number.
- The approximate annual UK revenue.
How to choose a business bank account
It’s difficult to say which bank offers the best small and start-up bank business accounts. There are so many great bank accounts out there, at home in the UK and abroad, each with its own banking and online features.
One of the things most business owners should look for is lower costs – and many UK banks offer fee-free banking for the first 12 to 18 months. However, there’s usually a significant hike in fees once the opening period is over. It’s worth checking how much these fees will cost your business in the long term.
You should also check how flexible the account is. Just like a mortgage, you should look for the flexibility to switch to a new bank account once the payment fees start to stack up or change when the initial rate is over.
It’s also worth considering which business features your company could benefit from, such as online tools, earning cashback on your purchases, or interest on your opening balance.
Use Fondy Flow as a business account
If you need a way for your business to simplify the process of setting up multiple accounts, managing payments, and making it easier to sell your products overseas, then a Fondy Flow multicurrency business account may be just the ticket. Fondy Flow accounts come equipped with their own IBANs, meaning they work similarly to bank accounts, enabling you to conduct business like a local in different countries.
Whether it’s receiving and transferring funds or making payouts in multiple currencies, a Fondy Flow account removes the hassle, expense, and time restraints usually associated with processing business payments. Even better, Fondy Flow offers convenient features such as split payments, reconciliation, and instant settlements to help automate the payment collection and cash flow monitoring process.
How to compare the best small business bank accounts
If you’re a new business or even just switched to Virgin Money, you’ll get 25 months of fee-free banking. To be eligible, you need to be a new UK business ready to open an account within 12 months of starting up or a small business or start-up with a turnover of less than £6.5 million.
After the fee-free period, you’ll be switched to the business tariff payment – it’s £6.50 a month, excluding charges for other transactions like Direct Debits and cash paid in. That said, you’ll save £162.50 in just over two years. Virgin Money also offers specialist bank relationship management and an optional overdraft in the UK.
Online business bank accounts
If you’re looking at a challenger bank, Tide and Starling Bank have some of the best online business bank accounts in the UK. Tide has a dedicated mobile-first business current account with three different price plans, from free to £49.99 a month, while Starling Bank has a free account with options for both limited companies and sole traders in the UK.