Startup business bank accounts can help you manage your company finances as you get your business up and running.
We're on a mission to improve the finances of the nation by helping you to spend wisely and save money
We're on a mission to improve the finances of the nation by helping you to spend wisely and save money
By Laura Rettie, Personal Finance Journalist.
Setting up a new business can be exciting yet intimidating. Find out how to choose the best bank account for your business with our guide.
A start-up business account is a bank account suitable for companies that have only just started trading.
Similar to standard business bank accounts, these accounts have features that make them the best business bank accounts for start-ups with a small turnover.
With a start-up business account, your company will be able to receive payments from customers, create a payroll for staff, set up direct debits and standing orders, and track your cash flow.
Start-up business bank accounts are only available to businesses that have been trading for less than a year, making them different from small business bank accounts.
Some features of the best business accounts for start-ups include:
Most businesses are legally required to have a business bank account. If you're starting a limited company, where the business is registered as its own legal entity, it will need a business bank account to register it in the UK.
A business bank account helps keep the finances of your start-up business separate from your personal finances. This can be really important for tax purposes.
If you're just starting out as a sole trader or freelancer, you're not legally required to have a business bank account because your business finances can also be considered your personal finances.
However, some personal current account providers will state in their terms and conditions that their accounts cannot be used for business transactions.
Here are a few reasons why having a business bank account is worthwhile:
Most business bank accounts, including start-up accounts, will come with fees, and you'll struggle to find an entirely free business account.
You'll most likely have to pay an annual fee to keep your account open, and the amounts can vary depending on the provider and the features available to you. This annual fee will usually be taken from your account each month.
Some business bank accounts for start-ups may be advertised as 'free accounts', but this can be misleading.
When an account advertises itself as free, it usually means there's no annual fee, not totally fee-free.
These types of accounts will charge you a fee each time you complete an online transaction or pay a percentage of each cash withdrawal you make. These charges can make your start-up account reasonably expensive, especially if you're regularly using a service that charges a fee.
Look out for business bank accounts with introductory offers. Some accounts may offer 'free periods' where the annual fee or charges do not apply, saving you money.
The best start-up business bank account for you will depend on your company's situation and which features best suit your business's scale and how it operates. Providers offer lots of different features and perks, so it’s important to compare several before making a decision.
Some things you'll have to consider when picking the best bank account for your start-up are:
The vast majority of business bank accounts, even those tailored for new businesses, will charge an annual fee for you to keep your account open. This fee will be taken from your balance every month and could be a considerable expense.
As well as this, there may also be fees for specific features. Some accounts will charge you for withdrawing cash or transferring a balance online. Consider how you're going to use your business bank account the most and look for an account that doesn't charge you to do what you need to do regularly.
Some providers may require you to pay a minimum amount into the account when opening one. If the minimum opening deposit is over your budget, it may mean the bank account is unsuitable for your start-up.
Many start-up business bank accounts will have limitations on what you can do.
Examples include having a transaction limit. A provider may limit the number of transactions you can complete in a month before fees are applied. If your business has many customers making multiple, low-value transactions a month, it could impact your business's potential income.
Some providers also have limits on the maximum value a single transaction can be. For businesses that offer more expensive services to clients, this limitation can be a hindrance.
When choosing a start-up account for your business, consider how these type of limitations will impact your business.
Many start-up business accounts will offer additional features that can be useful, especially if you're a first-time business owner. Many common features include accounting and invoicing software, educational resources, and online banking.
Bank accounts that have these features will usually charge a monthly fee, meaning you'll have to evaluate the cost of these to make sure they're worth it.
For example, some businesses may not need invoicing software, meaning paying for that feature may be a waste of money. Get the best start-up business account by choosing one that only has the features you need.
Start-up business accounts might not be the best solution for every new business.
For example, if your new business has a large cash flow, a standard business bank account that allows larger transactions may suit your circumstances better.
If you're an online business or a merchant who wants to provide their customers with a simple way of paying for goods, you may want to consider a merchant account.
A merchant bank account allows you to receive card payments from contactless, chip and pin, or online. The benefits are huge for some businesses that rely on this payment method, however, merchant bank accounts take a percentage of every card transaction.
You can apply for a business bank account online or in-person at a branch of a bank.
After you've completed your application, on average it takes approximately 1-4 weeks for your account to be opened. However, some providers will respond within 24 hours and have your account opened and ready to go.
To be eligible to open a start-up business account, you need to be over 18, be a permanent resident in the UK, and have your business registered in the UK.
For a start-up business account, your business cannot have been trading for more than a year.
When you apply for a business account you'll need to include the following in your application:
The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.
One of the main reasons for getting a business account is to protect your personal finances and credit rating. When you use your business account to apply for loans or credit cards, it'll be the business's credit history that's checked, not your own personal credit report.
Because of this, your credit rating won't be impacted when your start-up business account is in use.
The time it takes to have your business bank account open and ready to be used will depend on the provider.
Some online-only providers may be able to give you a decision within ten minutes. However, others will need a few weeks to complete their checks. If you're already registered at the bank you're trying to open a business account with, this can speed up the process.
Yes. You can apply for any business bank account online, either directly on the lender's website or app. You'll have to attach scans or images of the required documentation when doing so. Opening a start-up business account online is usually faster than applying in person at a bank branch.
It's unlikely a credit check will be performed when opening a start-up bank account, meaning you should be able to open an account with bad credit.
However, If you're applying for an overdraft, then your credit history is likely to be checked. but most business accounts for start-ups do not offer overdrafts.
