Which Bank Account is Best for a Small Business

Which Bank Account is Best for a Small Business?

Do you remember when life was simple when we just had six or so major high street banks. In those days, deciding which business bank account you should use for your small business was easy – you pick the least bad choice. Simple.

Finally, after years of mediocre business bank accounts aimed at small businesses, we have a plethora of options. Probably too many in fact. I’m sure there will be consolidation in the market to come.

But not all small business bank accounts are created equal. They will all tell you the same things, but the proof is in the pudding. There has been an explosion of new challenger banks opening all vying for our attention and money, but which one is right for your small business?

We are sure you have better things to do than work through the fine detail to ensure you end up with a small business bank account that meets your existing and future needs. 

So, if you have ever been left scratching your head wondering ‘which bank account is best for a small business?’ here’s a simple answer: 

The short answer is there is no short answer to knowing which business bank account is best for a small business. Each business and business owner will have different requirements, so it really is an individual decision. 

Which small business bank account should you use? The one that’s right for you.

However, don’t think you don’t have some options when choosing a bank account for your small business – let us guide you through the range of options and provide you with a sense of what would work best depending on where you are in your business journey.

Which bank is best for small businesses?

Which bank is best for small businesses really depends on what that small business needs from a banking partner. 

A small business looking to grow and expand operations may have a need for working capital through a loan, invoice finance or an overdraft while a restaurant or bar might be looking to minimise the cost of cash paid in and access to branches to pay that money in.

Which bank is best for your small business will be driven by your requirements so the best place to start would be to draw up a list of what you think you need from your bank and then cross reference that list against what the various banks offer.

Here is a list of questions you may wish to consider when deciding what is important to you:

  • Are they a bank? You’d be surprised how many new operators are not actually UK-regulated banks. Does that bother you?
  • Is my money protected by the FSCS deposit protection of up to £85,000? Could you afford to lose the money you have in your bank account?
  • What are the monthly fees?
  • What are the hidden/extra fees?
  • How usable is the online banking?
  • Do they have a mobile app?
  • What is customer support like? Check them out on the business banking service quality survey
  • Where is my nearest branch? Do you prefer dealing with a person?
  • How easy is the account opening process? (you may only do this once, but it might be a precursor to how difficult they will be to deal with moving forward)
  • What are the transaction limits? How many payments and deposits do you make each month?
  • How many cards can I have on my account? Who is going to be spending money and how much control/flexibility do you have over those cards?
  • What is their ethical stance? Where do they invest money, who do they fund – does that align with your values?
  • Will I have a relationship manager? Will you be dumped into the general melting pot, or will you have a dedicated contact? Again, not as big a deal as it used to be. I’m still waiting for my relationship manager to get back to a query from 2017. 😂
  • Do they offer foreign currency accounts? Not as big a problem as it once was as you could find an alternative with Wise or Revolut.
  • Will you need an overdraft in the future? Surprisingly not all banks will offer an overdraft.
  • Do they offer accounting software integrations? Seems trivial but could save you a bunch of time dealing with your bookkeeping.

If you want to get the full lowdown on the performance of your potential banking partner, check out the business banking service quality report. You can thank us later.

Best free business bank account?

There are lots of free business bank accounts on the market. Moreso than ever before. Historically business banking was a service that you paid for even though personal banking was free to use.

As new banks have come into the market, and they try to steal a slice of the market for themselves there is more of an incentive to offer free business banking to entice you away from your existing bank. That is great for the consumer – you.

Don’t worry about why business banking is free. It does not mean that bank is going to go bankrupt anytime soon. 

The way the UK banking system works banks can only lend money in direct proportion to the amount of money they have deposited so the more of your money they have the more they can lend and the more interest they can earn. That as well as the currency exchange is what makes the money for banks. The best way to oil the wheels is to give you free banking.

Which is the best free business bank account for you? It depends. Ask yourself these fundamental questions?

  1. Do I need an overdraft facility?
  2. Do I want to be paid interest on credit balances?
  3. Do I want certainty of fees?
  4. Am I going to be paying cash into my business account?
  5. Do I want to stick with the same bank for more than 12 months?

If you answered yes to one or more of the questions above then perhaps paying a bit of money for your business bank account will save you time, pain, and money overall.

Our advice would be to draw up a list of the things that are essential and find an account to match. If that is a paid account compare the cost of that account against the potential hidden charges of your ‘free’ business bank account.

Which is the best free business bank account? You decide.

Sole trader business bank accounts?

If you run your business as a self-employed individual, you do not legally need to have a separate bank account for your business items. Should you have a separate bank account for your business transactions? 100%. Why? Because the amount of time you waste sifting through your bank accounts trying to decipher between personal and business expenditures is worth it alone.

You may struggle to get business finance if your bank cannot understand your position based on your bank accounts with a muddle of personal and business transactions. 

You may end up paying too much or too little tax if you, your bookkeeper, or your accountant cannot understand whether transactions are for you or your business trade. People tend to err on the side of caution, so you are probably leaving money on HMRC’s desk.

Do you want to share with your bookkeeper or accountant where you spend your money? You would be surprised.

With the introduction of Making Tax Digital on the horizon for Income Tax, we would urge you to re-think having a separate sole trader business bank account. A lot of the options on the market are gearing up to help you with meeting your MTD (Making Tax Digital) filing obligations.

A sole trader business bank account is much more than a bank account. It is a bills manager, a savings tool, a receipt capture tool, a payments alert system, and an invoice generator to name but a few.

If you have never previously considered a sole trader business bank account now is the time to get your head in the game. Here are a few of our favourite options:

Small business bank account comparison?

There are plenty of wonderful sites out there that will provide you with comparison tables on which small business bank account is best for small businesses. They will probably also be receiving an introducer fee for the small business bank account comparison table you were looking for.

We have not supplied one here as there are many available. What we are aiming to do with this article is provide you with a free impartial view of what options are available to you for your small business bank account without it being swayed by a referral fee.

We are acting merely as a prompter to get you to ask the right questions before deciding on which business bank account you should use for your small business.

Below is a list of sites where you can find a small business bank account comparison table:

FAQs on choosing a bank account for your small business

What is the difference between a personal and a business bank account?

A business bank account will normally have a monthly charge attached to it and a range of other fees based on the volume or type of transactions. For this reason, a person running a business as a self-employed individual may opt to use a personal bank account to avoid the charges which they are perfectly entitled to do. We would whole heartedly advocate using a separate personal account for your ‘business’ transactions to make your accounting and bookkeeping easier and hopefully cheaper.

Check the terms and conditions of your bank as some will prohibit you from using a personal account for the purpose of running a trade.

If you run a limited company the law sees this as a separate legal entity so a personal bank account simply will not do. You must have a business bank account for your limited company. This ensures that you and the business are kept separate, and any liabilities incurred by the business are just that – liabilities of the business and not you as an individual.

How long does it take to open a business bank account?

Traditionally it would take 1 to 4 weeks to open a bank account for your small business. Provided you gave the bank all the relevant documentation, own a printer with ink and no one in the bank lost your application.

It is no longer that painful. You can start and often complete the process of opening a business bank account in a matter of minutes. A lot of the back-office checks of your documentation have been brought into the 21stcentury and checking your documentation as proof of who you are can now be done as part of that process such as uploading a copy of your driver’s licence.

If time is of the essence when you are deciding which business bank account is right for your small business, then make sure you do your due diligence around how long it takes to open a business bank account. 

Remember that the original process of opening a bank account will be representative of what it will be like to deal with this bank on an ongoing basis. The experience you get at the beginning should be the best they have to offer. If you are left feeling deflated before the ride has already begun perhaps you need to get off now while you still can.

How long does it take to switch business bank accounts?

If you remember the Switch Guarantee adverts, you should know the answer to this one but for anyone younger than me it is within 7 days, with all your recurring payments, payees and balances automatically transferred.

There are more than 40 banks signed up for the Current Account Switch Service which guarantees that your account will switch on a day to suit you. 

The process is simple:

  1. Check you’re able to switch (less than 50 employees and annual turnover below £6.5m)
  2. Find a new account
  3. Review existing payments (cancel any old ones – no point switching them across)
  4. Gather your documentation
  5. Open your new account
  6. Choose your switch date
  7. Start your switch

For more details check out the Current Account Switch Guarantee website.


Apathy has been the major reason high street banks have supplied a poor level of service to the small business community for so long. It has been their biggest sales tool.

With the creation of new challenger banks, you now have more variety and a chance to bank with companies that better align with your goals. They put the customer at the heart of what they do so things that would normally take an age now take minutes.

You no longer must take your loan or credit cards from the bank that supplies your current account because it is too much hassle to shop around.

Software and technology are at the forefront of these changes and new banks are innovative in their approach to business problems. Traditional banks can no longer just see business customers as a database to sell other business services – they must deliver a top-notch banking infrastructure and service fit for the 21st-century business. The competition is.

Which business bank account should you use for your small business? The one that makes your life easier not harder. The one that provides you with what you need now but you trust will grow and evolve along with your business requirements.

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