A business bank account might feel like a low priority when you're starting out on your first new business adventure. Perhaps it's on your 'to do' list but it's not something you see as very important at the moment. You can manage everything through your personal account for now, right? While that may be true, there are other reasons to consider for opening a business bank account sooner rather than later.
So, why business banking?
It saves you hassle. Probably the most obvious reason for opening a business account is that it helps you to separate your personal and business finances. This will make life a lot easier for you when the times comes for you to complete your self-assessment tax return.
Claiming business expenses. If you want to claim business expenses, then HMRC must be confident that they are legitimate. It is much harder to show this if all of your expenses come from the same account. You will be able to show a clear breakdown much more easily if you have separate accounts for personal and business use.
Credibility. When you work with customers and clients, your business will appear more professional if you operate from your own business account rather than a personal one.
What to look for in a business bank account
When looking for a business account, you may be tempted to go straight to your personal account provider. However, it is always worth shopping around as different companies will offer a number of differing rates and benefits. Here are a few things to look for:
- Do they offer the support of a personal adviser?
- Is there a free introductory period?
- What are the annual charges?
- What other charges are there (e.g. transaction fees)?
- What online banking facilities are there?
- Is out of office hours support provided?
- Are there foreign currency facilities?
- Is an overdraft included?
Not all of the above factors may be important for you and your business, at least at first, but this list should help you to clarify your priorities and make your search for a business account easier.
As with any type of bank account or credit it is always a good idea to check your credit report before making an application. That way you can try to resolve any potential issues before they make an impact. If you spot there’s some better practices to apply, or incorrect data to fix, it’s better to do it before the lenders check it out. There are even credit report providers that will let you check some details for free.
Top tips for credit success
- Make sure you're registered on the electoral roll. Lenders use the electoral roll as a way of verifying your identity. Sometimes, not being registered can cause you to be declined.
- Check for any misspellings. These days most credit searches are automated and something as simple as a misspelled name or address can cause major issues.
- Do you have any late payments, defaults or county court judgments? These can make it hard for you to get accepted for a business account. You will need to look specifically for lenders who have products for those with a poor credit rating.
If you do discover that your credit report has a few issues, don't despair. There are lenders who have products specifically for you. Another option is to open a card account. This will give you the basics you need to get started until your credit report has improved and you can move to a business current account. The one thing any banking customer has is control, and when allied to the right information, that’s all you need to turn things around.
Ade Potts is Managing Director, Experian SME
Further resources and advice for SMEs is available from Experian’s website.