Published on : 11 May 20205 min reading time
Many would be entrepreneurs often overlook how important finding the right bank for business can be in their new enterprise. All too often, they simply settle for the convenient option of opening a business account where they already hold personal accounts without any regard for how their daily transactions may be affected. Sparing the time to select the most appropriate financial account for a new project can have a considerable influence on its chance of success.
Choosing the Right Bank
All businesses are unique with their own individual requirements, aims and methods of conducting their affairs. Accounts that suit large enterprises employing several people might be totally inappropriate for a sole trader’s small scale, home-based project. One of the most important factors to consider is how to choose business bank of the right size. Many of the large, well-known banks have the resources to offer a wide range of deals, loans and overdraft facilities. They also offer the convenience of using local High Street branches and the opportunity to meet with financial advisers who can provide helpful assistance. Smaller banks might not always have the widest range of financial offers, but can offset this with a more personalised service. Many can even include attractive charges and transaction fees in an effort to gain new customers. Some entrepreneurs prefer to choose a smaller bank where they feel as though their custom is valued rather than being overshadowed by large businesses. Establishing a rapport with the manager of a small bank can enable an entrepreneur’s personality and skills to be taken into consideration when seeking loans or advice. Choosing an online banking system can provide businesses with an extensive range of options. They are easy to access and extremely convenient to use. Even overdraft facilities can be obtained with relative ease. However, a major disadvantage is the lack of personalised support in the form of face-to-face meetings, which are replaced by e-mails and telephone links. However, online banks can offer economic business transactions due to their reduced overheads.
Selecting Accounts and Fees
Businesses of all sizes need to maintain a consistent cash flow to survive. Optimising the amount of weekly or monthly expenditure is crucial by having ready access to funds. It is worth searching for an account that has a minimal impact on a project’s cash flow. Fees can vary enormously between banks. Some large banks with a network of High Street branches to maintain, typically charge fairly high fees to compensate for their expensive overheads. Small provincial banks with an apparent appreciation of the local markets in their particular area might offer attractive fees. Conducting research to compare the charges of a wide range of banks can uncover the most appropriate banking fees which should help to promote a regular cash flow. In some cases, fees can even be waived for a set time limit of up to two years. When researching banking fees, consider how an individual project’s business transactions might generally be carried out. For instance, will customers be paying in cash, point of sale credit and debit cards, foreign currency exchanges or electronic payments? Typical banking charges include higher fees for processing a cheque than an online transaction. An ideal starting point is often an account without fees. However, as this is unlikely to be a permanent arrangement, a project’s future turnover and cash flow needs to be assessed adequately to ensure it can survive the impact of suddenly acquiring fees.
Assessing Interest Rates
Many current accounts for businesses frequently offer a 0% Annual Equivalent Rate (AER) related to the sums of money a project actually earns. Small scale start-ups are less likely to be concerned about AER, although projected expansion can influence an entrepreneur’s decision on how to choose business bank facilities. Intermediate AER percentages are often set in the region of 0.1% to 0.25%. Some ambitious projects with a higher annual turnover and reliable cash flow can even locate AER of up to 1.75%. However, accounts for businesses with this generous rate usually impose conditions such as making regular monthly deposits and leaving funds untouched for a specific time limit of at least one year. Smaller projects may not have a consistent enough flow of surplus cash to deposit in savings accounts for businesses with high AER percentages. Choosing an account with flexible deposits and convenient instant access to funds could be much more appropriate.
Benefits of Choosing the Most Suitable Bank
Businesses continually have to adapt and devise new strategies either to survive or maximise their potential for growth and profit. The way forward may include restructuring finances by searching for transaction fees, overdraft facilities and loan schemes that have become more appropriate. New strategies may include changing to another bank. Some entrepreneurs take advantage of the terms offered as part of a deal to leave existing banks and find more suitable accounts. Most banks provide an easy transfer method to encourage new customers to join. Transferring accounts for businesses can usually be completed within seven days with minimal disruption. A major disadvantage of transferring accounts may be the loss of any financial incentives gained through being a loyal, long-standing customer. Finding the right bank for business depends on achieving an optimal balance between fees and facilities in relation to the preferred level of customer service. Online banks generally include low fees and convenience with reduced personal attention. Large High Street banks provide the widest range of services with personal assistance in local branches, although facilities can be offset by expensive fees. Small banks frequently fall somewhere between the two extremes. Whichever you prefer, ensuring it is appropriate for your particular enterprise, could provide the best opportunity for success.
5 Ways How AI Can Benefit Financial Services