A Guide to Business Banking in 2023

So, you are ready to launch your new business, but have you thought about everything you need? 

Business bank accounts can become overlooked once you start to focus on product development, marketing, and start-up costs. 

However, opening the best type of business bank account is integral to the success of your new business venture.

In this article, we’ll overview your expert guide to business banking in 2023. Read through our advice and find out everything you need to know about the best business bank accounts and more.

What Is Business Banking?

Business banking is a business’s financial relationship and activities with a bank.

Business banking will offer businesses a range of services including business bank accounts and business savings accounts, business loans, and business credit cards.

Each financial product is tailored to the business and their individual needs, providing priceless expert business advice, especially for startups.

Do I Need a Business Bank Account?

Business bank accounts are not mandatory when launching or operating a business as a sole trader or a limited company. Four in ten of the UK’s 5.7 million micro businesses use personal current accounts to deal with their business finances.

However, business accounts are extremely useful. Whilst personal bank accounts allow money to flow into and out of your account, your business bank account will offer so much more. 

What Are the Benefits of a Business Account?

With business accounts, you could create and send invoices, organise and pay your taxes, and integrate simple accountancy functions. 

You could apply for a business overdraft for your business bank account to help manage your cash flow succinctly. 

However, there are usually charges to consider when using a business account. Some banks will charge monthly fees to open and use a business bank account, whilst other banks offer free accounts. All business accounts will require other charges, however, such as fees to transfer funds or withdraw from an ATM.

Despite costs and charges, a business bank account provides you with the best chance of financial prudence in business. You can monitor spending immediately and avoid substantial waste.

Additionally, a business bank account will protect your money and will reduce the chance of cyberattacks on your finances. With the dominant use of digital banking, 53% of businesses allow staff to access such platforms with personal devices.

Therefore, you need to take every possible precaution to ensure your digital systems are fully secure and using a trusted business banking provider will do exactly that.

What Is Business Banking vs Commercial Banking?

Business banking refers to financial services used by small-medium businesses. Commercial banking, or corporate banking, is the term given to financial services used by large enterprises with six-figure turnovers, or higher.

What Services Do Business Banks Offer?

Business banks offer a range of business bank account and savings account options, suitable to the needs of every type of business. 

They also offer financing solutions, such as overdrafts, business credit cards, business loans, payroll assistance and expense solutions to help manage your money better.

The services that a business account can offer you will depend on your credit history and your business performance. New businesses may have fewer options available until you begin to generate revenue, relying on your own personal credit score.

What Makes a Good Business Bank Account?

A good business bank account suits your style of business. So, if your business deals in cash often, free ATM withdrawals would provide you with a significant benefit.

If you transfer money internationally every month, choosing a business bank account with free international payments would be the perfect choice.

However, as with most financial products, the best business bank accounts will be available for high credit scores.

How Do I Open a Business Bank Account in the UK?

You could open a business current account online within a few minutes, provided you have the necessary documentation and excellent credit history.

Follow these simple steps to open a business account in the UK:

1. Choose Your Account Type

Decide what type of account would suit your business. Do you want a business account that mainly transfers money and makes online payments? 

Or, will you need regular ATM withdrawals? Identify what is important for you and your business at this stage.

2. Find a Bank

Once you know what it is you want from a business bank account, identify the bank you want to use. Check whether the bank offers an account with the features that you need most.

3. Check Costs

Each bank will require a variety of monthly fees or transaction charges, so ensure to read all necessary information and banking details. Be aware of any hidden costs or charges.

4. Application and Documentation

Next, make a formal application for a business account. Simply complete the business account application for the account with suitable monthly fees.

You will need proof of your identity and UK address to open a business account in the UK. Evidence of this type will be required for every individual involved in the business and account opening. 

Business verification documents will also be required to open a UK business account, such as your registration number from ‘Companies House’.

5. Open Your Account

If you are successful with your application, you will be able to open your business account, either online or in person. 

Many banks allow you to switch your current account to them if you value the features offered by another bank. Simply provide your existing account number, sort code, and transfer date.

6. Deposit Funds

Once your account is open, deposit your cash and start to take advantage of the great features of your new business account.

What Is FSCS Protection?

FSCS protection is the Financial Services Compensation Scheme that protects your cash if a bank goes bust. 

Most UK current accounts and savings accounts are protected by the Financial Services Compensation Scheme, although not every penny of your money will be compensated should a bank stop operating. 

For example, a business’s current account may come with FSCS protection of up to £85,000.

Business Banking Pros and Cons

To find the best business bank account, you need to be aware of the pros and cons of this type of financial product.

Pros

✔️ Financial security — Business bank accounts provide you with FSCS protection, protecting your cash if the bank should ever fall into trouble. 

It is also wise to separate your business bank finances from your personal current account, safeguarding your own money.

✔️ Ease of use — Business accounts typically come with online banking features so you can transfer money and check payments easily from any location. 

Real-time updates help you to manage your business finances so you can confidently avoid waste and spend money wisely.

✔️ Business features — A business account may offer you the opportunity to invoice others and pay your bills and taxes. 

Standard accountancy and cash flow management features help you to manage your finances professionally.

✔️ Support — Particularly if you are a new business owner, you can gain a considerable amount of support from your business bank account provider. 

For example, you will receive prompts regarding tax liabilities as well as guidance to meet legislative requirements.

Cons

❌️ Fees — Most business bank accounts will charge you a fee. Some business bank accounts may charge a monthly fee, or you may be charged separate fees per withdrawal or transaction. 

Such fees can mount up so it is important to research the best business bank account fees available.

❌️ Challenging criteria — You could find it difficult to open a business bank account due to the stringent checks involved, such as tough credit checks.

❌️ Overdraft issues — You could find it difficult to successfully apply for an overdraft. There is an appeals' system for those who are unsuccessful in gaining an overdraft for their business bank account. 

However, only 14% of failed overdraft applicants were aware of the appeals system.

❌️ Keeping your account — With banks overwhelmed post-pandemic, some banks are closing business accounts due to a lack of manpower in servicing those accounts.

Best Business Bank Account — Reviews

Here are the best business bank accounts currently available. Check out this section for the latest deals for your business.

1. Tide — Free Business Bank Account — Great Overall

• Free business bank account
• Free Tide business card included
• Expense cards: £5 per month
• Transfers in and out: 20p per transfer
• ATM withdrawals: £1 each time
• Create and send invoices
• Integrate accounting applications
• Online banking

Visit Tide

The Tide Free Business Bank Account is a great choice for new businesses who need to find their feet in business banking. There is no monthly charge with this business account and you can create and send invoices free. 

Integrate accounting applications such as QuickBooks into your business account for easy-use features.

However, you will be charged for certain actions taken when using this account. For example, ATM withdrawals are charged £1 every time, and transfers will cost you 20p each. 

Optional expense cards are available to use in your business at a cost of £5 each per month.

2. Revolut Business — Grow Business Account — Great for International Payments

• Monthly cost: £25
• Online-only account
• Free metal Revolut card included
• Free plastic company cards for employees
• Free virtual cards for your employees
• International payments: 10 free
• Local payments: 100 free
• Spend in 150 currencies
• Utilise recurring transfers

Visit Revolut Business

The Revolut Grow Business Account is tailored to make international payments and spending in 150 currencies simple. This is an award-winning business account, recognised for being user-friendly business current account providers.

You will need to pay a monthly cost of £25 which includes 10 free international payments and 100 free local payments. You will receive an exclusive metal card for you to use, in addition to free plastic cards and virtual cards for your employees to use.

You can set up and manage recurring transfers so you can easily handle your business dealings.

3. Barclays — Startup Business Bank Account — Great for New Businesses

• Monthly cost: free for new Barclays customers
• Cost after 12 months: £8.50 per month
• Electronic payments: 500 free per month
• Additional electronic payments: 35p each
• Debit card payments: free
• ATM withdrawals: free
• Cash deposits: 60p per £100 deposited
• Cheques deposited: 60p each

Visit Barclays

The Barclays Startup Business Bank Account offers free digital banking for 12 months if you are a new customer. Monthly fees will be £8.50 per month after this period.

You can send 500 electronic payments free of charge each month, with any further electronic payments charged at 35p each. 

However, you can withdraw cash from ATMs and make debit card payments completely free, providing some user-friendly features from Barclays.

If you want to deposit cash into your account, you will need to pay 60p per £100, although some business accounts do not offer this feature. Additionally, depositing cheques into your account will carry a 60p charge.

4. Tide — Pro Business Bank Account — Great for Experienced Businesses

• Monthly cost: £18.99
• Free Tide business card included
• Expense cards: 2 free expense cards included
• Unlimited transfers in and out
• ATM withdrawals: £1 each time
• Create and send invoices
• Integrate accounting applications
• Priority in-app and phone support
• 24/7 legal helpline
• Exclusive member perks
• Online banking

Visit Tide

The Tide Pro Business Bank Account is the perfect choice for established and experienced businesses.

The monthly cost of this business bank account is £18.99 and you will receive 2 free expense cards for yourself and your employees.  

Integrate accounting applications such as QuickBooks into your business account for easy-use features whilst also creating and sending invoices at no extra cost.

With the Tide Pro account for business, you can enjoy free unlimited transfers in and out of your account, although ATM withdrawals are still charged at £1 every time.

You can also enjoy 24/7 legal support and priority in-app and phone support should you ever need any help. Additionally, you can look forward to exclusive member perks such as discounts.

5. Metro Bank — Commercial Current Account — Great for Large Enterprises

• Monthly fees: £0
• Minimum annual turnover: £2 million
• Funding options to ease cash flow
• Dedicated relationship manager
• 24/7 support
• Easy-to-use platform
• European card purchases: free
• European cash withdrawals: free
• Outside Europe card purchases: 2.99% fee
• Outside Europe cash withdrawal: 2.99% + £1.50
• Unarranged overdraft charge: 25% EAR (variable)
• £25 unpaid item charge
• £15 for a paid item in an unarranged overdraft

Visit Metro Bank

The Metro Commercial current Account is a solid business account for large enterprises that achieve an annual turnover of over £2 million.

With this commercial current account, you can access funding options to manage and ease your cash flow and working capital when required.

You will receive 24/7 support when you need it and anytime access to an easy-to-use platform. You will be provided with a dedicated relationship manager who will understand your business thoroughly. 

Furthermore, you can make unlimited free cash withdrawals and card purchases inside of Europe. However, outside of Europe, you will face a charge of 2.99%. An additional fee of £1.50 is also required for cash withdrawals outside of Europe, in addition to the 2.99% charge.

A substantial fee to be aware of, however, is an unarranged overdraft fee of 25% EAR (variable). If you do not have enough money in your account and a payment is made, you will be charged 25% interest.

Further charges include a £25 charge for unpaid items and a £15 charge for a paid item when you do not have enough funds and an unarranged overdraft is used.

A Guide to Business Banking in 2023: Summary

The best way to secure a good future in business is to manage your finances well. This can be done effortlessly with a business account. 

Despite being an optional resource, a business account ensures your business finances stay separate from your cash. 

You can integrate accounting techniques into your banking, organising your taxes and creating and sending invoices with ease. 

However, almost all business bank accounts will either charge a monthly fee or charges per transaction or transfer. Therefore, choosing the best business bank account for your type of business is essential so you gain the most out of your account.

Related Guides:

• The Beginner’s Guide To Business Finance
• How to Get a Business Loan in 2023
• What Are Business Credit Cards?
• Best Free Payroll Software