Setting up a business bank account

25 Jan 2022

Setting up a business bank account isn’t a complicated process. Some banks might still insist that you present the necessary documents face-to-face before opening an account. However, opening a business account nowadays can generally be completed online. Over recent years, many new niche banks have arrived in the business banking space, and they exist to serve business only; they offer no personal banking services. Most of these modern fintech business banks can approve your account in minutes if you supply all the relevant documentation and further details. Once your business account gets approved, you can set up direct debits, standing orders, and apply for loans, business credit cards, and overdrafts or alternatives. You can apply for extra debit cards for your staff and manage all your business account affairs online.

Couple filling in application forms

What is a business bank account?

A business bank account allows you to conduct your everyday business transactions, like paying staff and services or buying the raw materials from your suppliers.

A business account will keep your business’s finances apart from your personal bank account transactions. Even if you’re running a part-time micro-business, keeping your personal affairs separate will help when dealing with, for example, self-assessment through HMRC. Streamlining your business activities also makes it easier for your bookkeeper or accountant to compile and then present your accounts for inspection.

A business account typically comes with added features, and many accounts link to free services such as accountancy software, helping you manage your affairs. Certain banks set conditions on a business bank account depending on size, turnover, projections and business type.

Opening a business account can take minutes from application to acceptance, especially if you’re not looking for any credit facilities initially. Try to have as much relevant detail at your fingertips before applying as it’ll help to speed up the process.

What does your business need?

It’s worth considering what your business needs to begin trading. Most firms don’t use cheque books much nowadays; business payments are made online with direct transfers or debit cards, so you’ll probably need a debit card. You might need a paying-in book if you’re a business that handles cash payments, such as a high street business.

Nearly all banking is online now, so you’ll need to quickly familiarise yourself with the navigation of the banking website and the assorted options you get. For instance, you’ll need to transfer money to pay bills, set up direct debits and standing orders. Perhaps there’s also a possibility to move excess funds to a higher interest-bearing account linked to the primary business account.

Choose an account to match your business type

The opening account options you have will become clear as you begin your application. You’ll have to make choices such as sole trader, limited liability partnership, limited company or perhaps a non-profit organisation at the start of the application.

If you’re not asking for any credit, the time from application to approval can take minutes if there are no issues with the credit checks. A sole trader might undergo a stricter credit check than a limited company.

If your credit history isn’t perfect, then you might still be accepted for a business account, although the options might be limited, and the bank account version might be the most basic. But during the first stages of your business operation, the most basic account should be sufficient as you build your reputation and credibility. 

There are still options for credit if you or your business have impaired credit, and you can begin to explore them here once your bank account is open. 

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Make sure you have the correct documentation available

Whether you’re looking to open a sole trader or limited company account, banks have a legal responsibility to undergo identity checks, so as a minimum, you’ll have to supply passport or driving licence details.

If you’re a sole trader looking for an account in the business name, it’s still you that’s liable for the bank account. Therefore, before approving the bank account, the bank might ask for personal details such as your savings, whether you rent or own your home, and they may examine the liabilities you have.

If you’re running a limited company, you might need to have various documentation available for the bank before they can approve an account. Documents such as the certificate of incorporation and the articles of association are typically needed. 

You might have to scan and attach these details to an email or an online application form. However, many modern banks access Companies House online to confirm the company details automatically to speed up that part of the process.

Business bank account charges

Business bank account fees will vary depending on the type of account you use, the balance of money in the bank account and the types of business transactions conducted.

Some business accounts charge yearly or monthly fees. Others might be free for an introductory period, starting from three months. Certain business accounts might be free if the account stays in credit and the balance remains above a set amount.

However, suppose you’re paying overseas clients in foreign exchange or paying suppliers or bills directly online. In that case, you can expect to pay fees for each transaction. Here are a few examples of banking fees you may have to pay.

  •    £3 up to £50 as a monthly fee

  • £1 to withdraw cash

  •   £1 pay money in

  •    £1 make a bank transfer

If you know at the outset which services you’ll use most, you can begin to decide which bank suits your firm best. For instance, if you make very few cash withdrawals and most of your transactions and payments are online, why not look for a bank that charges the least for that specific service?

Compare charges, interest rates, terms and conditions

You must compare several vital elements of each business account before committing to an application because not all business accounts charge the same interest rates if, for example, you need an overdraft. The charges listed above can vary widely too.

Then there’s the terms and conditions. Admittedly not many of us read all the small print when we’re about to commit to an application, purchase or service. We’re prone to click a box that asks if we accept all the terms and conditions etc. But taking a bit of time to consider the application could save costs or confusion at a later stage, and most banks are under an obligation to outline the Ts & Cs in plain English.

Once you’ve opened your bank account you’ll be in a better position to apply for crest and loans. At Funding Options our Funding Cloud technology can accurately match your business’s unique profile in the industry's largest lender network. Begin the process by clicking here


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Vivek Seda
Vivek Seda

Asset Lending & Property Team Lead

Vivek Seda is the Asset Based Lending & Property Team Lead at Funding Options. Vivek has been in the commercial finance industry for over five years, helping SMEs in the UK access over £40m of funding in that time. He also supports the business on working on corporate finance and structured transactions successfully funding Acquisitions and MBOs for businesses.

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