Starting this post with a disclaimer that this is NOT a sponsored post by any company or bank. Every business is different and we all have different banking needs. That said, I've put together a comparison of three banks for a better understanding and easy comparison of the endless options available for startup owners out there.
While you can't only trust my opinion, I have also asked 10 other startups founders about their banking experiences and what they would recommend and found some reviews on TrustPilot!
Why Do I Need A Business Bank Account?
First, let's address the reason for needing a business bank account. Having a business bank account is a good idea for most businesses, even freelancers and sole traders.
So if you are running a business, do you need a business bank account? The answer is, YES! If you are running a commercial business, this is definitely necessary. Here are the key reasons to (Peavler, 2018):
Clean and accurate bookkeeping
Prove that your business is not a hobby
Separate business account required for incorporated business
A clear audit trail
Now that the need for a business account is established, here are some of the more popular options used by startups and entrepreneurs in the UK.
1. People's Choice: Natwest Business Startup Bank Account
What people are saying:
Great customer support
Reputation for being a trusted bank
Easy-to-use online service
Voted "Best Banking app” at the 2018 British Banking Awards
Businesses that have been trading for less than a year and have an annual turnover under £1 million.
18-months free business banking (Standard Published Tariff after)
Fee-free £500 overdraft facility if you apply within first 12 months
No annual fees on their Business Credit Card for the first 12 months
Free accounting software
Discount on DHL express for international shipping
Free banking excludes “Unarranged borrowing”, “Bankline charges” and any additional services, conditions may apply. For the credit card, you’ll need to apply within six months of opening your business current account. The overdraft includes additional specific charges.
2. For the Digitally-Savvy: Starling Bank
What people are saying:
21st century banking experience
Useful functions: Next working days planned debits and credits are visible and immediate phone notifications when transactions occur
Easy to use
Virtually all bank features can be accessed 24/7 with no direct contact with anyone
Described as "the future of banking"
Businesses that have fewer than 10 employees and less than £1.7m in annual turnover.
Zero monthly fees
No transaction fees for international card payments
Issued a contactless Mastercard debit card within 3-5 days
Categorised transactions - Whether it’s utilities, travel, entertainment or merchant
Instant notifications - stay on top of your account balance with real-time notifications
CSV exports to share your transactions with your accountant or accounting software like Xero
Accept cash payments at Post Offices
Flexible overdraft plans
As Starling is a licensed bank you are partially covered. In the event of the bank going bankrupt, it is covered by the Financial Services Compensation Scheme (FSCS), so you would be protected for up to £85,000 (Finder UK, 2019). The downside to this account is that only an individual who owns a limited company with significant share holding can open an account.
3. For UK/Europe focused businesses: Metro Bank
What people are saying:
Personal touch - Friendly and extremely helpful staff
Longer opening hours - 7 days a week, 362 days a year
Very easy and fast to set up an account
Customers love the human interaction and customer service
Businesses with a turnover under £2 million a year.
You will be assigned to a Local Business Manager
If your balance stays above £5,000 the whole month, the monthly account maintenance fee will be waived (It's £5/month if you go below £5,000)
No appointment needed - just walk into a store
No additional fees for non-sterling transactions or purchases in many European countries
Outside of Europe, transaction fees are relatively high at 2.99% + £1.50. Furthermore, this bank account is not suitable for businesses with international owners. There is a requirement that at least 50% of shares must be owned by UK residents. In addition, at least 50% of the business’s directors or beneficial owners must be residents in the UK.
With that said, here are reviews of 3 business bank accounts that you can consider opening if you are a small company running your own business. While I know all this information is quite complicated and difficult to digest if you are new to business terms, having an understanding of your banking needs will be beneficial for the long-term success of your venture.
Written by Wendi Lai
Campion, N. (2015). Do you need a bank account for a limited company?. [online] Rapid Formations Blog. Available at: https://www.rapidformations.co.uk/blog/do-you-need-a-bank-account-for-a-limited-company/ [Accessed 19 Feb. 2019].
Finder UK. (2019). Starling Business Account Review February 2019 | Pricing, fees and features. [online] Available at: https://www.finder.com/uk/starling-business-account [Accessed 19 Feb. 2019].
Lee, M. (2017). Banking Rules for Nonprofit Organizations. [online] Bizfluent. Available at: https://bizfluent.com/about-5049671-banking-rules-nonprofit-organizations.html [Accessed 19 Feb. 2019].
Monese. (2019). I am a Sole Trader and would like to open an account.. [online] Available at: https://support.monese.com/hc/en-gb/articles/360000823239-I-am-a-Sole-Trader-and-would-like-to-open-an-account- [Accessed 19 Feb. 2019].
Peavler, R. (2018). 5 Reasons to Keep Personal and Business Finances Separate. [online] The Balance Small Business. Available at: https://www.thebalancesmb.com/reasons-to-open-a-business-bank-account-393378 [Accessed 19 Feb. 2019].