1What are the Basics of Small Business Banking?

The concept of small business banking should be taken into consideration well before your business has opened its doors for commercial activity. There are several things that you need to consider such that you may ably compare and choose a proper business account when you arrive at your preferred bank or financial institution.

• Opening a business account is mandatory for persons who wish to open a limited company but sole proprietors can use their personal current accounts for business requirements though it is ill-advised to do so.
• Banks that have put in place a team dedicated to small business owners are an ideal choice lest there are good reasons why this shouldn’t be the case.
• It is crucial to know what different banks charge as business account levies including overdraft and transaction fees.
• Investigate to know what ‘extras’ different banks have to offer, for example, charge cards, free statements, credit cards, etc.
• Find out what the interest rates are on business accounts and business savings accounts. This may however not be applicable with regards to the current economic slump.
• Establish whether the bank offers new customers a fee-free period; if so you should definitely make the most of it.
• Is online business banking available? Thanks to its wide availability and increasing popularity you definitely want to use this service in your business operations.

2Comparing Different Small Business Bank Accounts

The next step in your quest for small business banking should be to find out what the most appropriate account for your business is. Compare what various banks are offering and create a list to help you make a decision. Small business banking comparisons are informed by the following:

• Objectivity is of the essence. You may be weighing the option of engaging the services of personal banking so that you may be able to concentrate better on the business. While this is quite okay, being objective will tell you whether or not this move will be cost-effective in the long term.
• Start your comparisons by establishing what the free business banking periods at different banks are. For start-ups this period is anywhere between 18 and 24 months but considerably less for existent businesses switching accounts to new lenders.
• Plan for what you’ll do after the free business banking period is over. Prudent small business banking should prompt you to find out what the cost of doing business after this period will be and will spare you the burden of having to switch bankers later down the road.
• Find out what all the bank levies you’ll be charged with are in terms of fees for deposits, day to day transactions, standing orders, ongoing monthly fees if any, and even for unauthorized and authorized overdrafts should you need such.
• You should also find out if your small business account will earn interest when it’s in credit and what rate this will be if indeed interest will be offered. Currently, thanks to the low bank rate, interest on current accounts is very low and it is only some of the major banks that have the ability to pay.
• Smart small business banking comparisons also involve checking out what the extras are. Your business may receive free brochures, accounting tools, software, insurance products, discounts, etc., upon signing up for an account. However, before enjoying the perks it is necessary to establish what the charges and fees are.

3Making your Choice of a Small Business Bank Account

At this stage you must have made a short list of various business accounts from which you need to select one. In choosing your small business banking account, take note of the following:

• It has to be a business account if you are starting a partnership, limited company, or any other business structure. Sole traders have the option of using personal accounts.
• The fact that you are a personal banking customer shouldn’t necessarily inform your choice of business bank account. Just because you are comfortable with the bank you currently deal with personally doesn’t mean you’ll be offered the best terms for your business.
• Compare the different accounts from different banks and check to see which of them has the best terms with regards to charges and costs.
• It is quite logical to go for banks that have strong backgrounds and reputations – their names are very familiar.
• Your small business banking account should definitely allow for online banking.
• While current times don’t make for impressive interest rates, you can instead base your comparison on the availability of other offerings like zero transaction costs and free banking.
• Likewise, it is prudent to opt for a bank that has a small business team in place. Such a team makes it easier for new account holders to set up and settle in; in addition to helping them with common small business account issues and needs.

4Opening Small Business Bank Accounts

Various documents are required for the opening of the small business bank account. These include a business plan and other of your business’ details in the event that you are shifting from another business account or starting a company. The following documentation is required:

• For limited companies the Certificate of Incorporation is required; you acquire this document once you have purchased the company.
• Several identity checks including a driver’s license, passport, some personal utility bills, etc., as required by the bank.
• A list of signatories who can sign checks.
• A mandate to open the account – this is provided by the bank.

5Why you Should Not Mix Personal and Small Business Banking

• Government regulations are such that only businesses can make business expense deductions. If your business looks like a hobby, using a personal bank account for its running will make it more difficult for you to convince the government that you are running a commercial business.
• When you need to make income and expense declarations for tax purposes it will be quite a hectic exercise separating business transactions from personal transactions.
• Using a personal account for business purposes will curtail your ability to present a comprehensible audit trail as opposed to when you can provide detached small business banking statements and records.
• Using a personal account for business needs is a sure recipe for overlooking or missing deductions and messy record keeping.
• Having your clients write checks in your personal name rather than a business name will look quite unprofessional; owning a small business banking account on the other hand definitely assures your clients that they are dealing with a serious commercial entity.