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Opening a business bank account is an important step when starting a new business. A lot of people wonder why they need to open a business bank account when they already have their personal bank accounts, which they can use. Well, it’s simple. A business needs a system to manage its money, and the benefits of getting a standalone bank account for your business are plain to see.

A business bank account is different from your personal or a private bank account as it’s made specifically for the business. As a result, it comes with a wide range of business tailored benefits. As a business owner, a business bank account will help you manage cash flow, track your expenses, and calculate tax liabilities.

Having a business current account is a good idea for any business; it doesn’t matter whether it’s a one-man-band or a freelancer. Sometimes, having a dedicated bank account for your business is mandatory. In this article, you’ll find all the information you need to open a business bank account in the UK –and more. Read on.

Opening a Business Bank Account

 

A prospective business owner must be aware of the process of opening a business bank account. Otherwise, you’ll end up wasting a lot of time and probably choosing the wrong bank account for your needs. So, what’s the process of opening a business bank account in the UK? Which documents are required to open a business bank account?

How to Make a Business Bank Account Application

The process of opening a bank account for businesses with UK residents as shareholders, as well as directors is quite simple. Most high street banks offer business accounts. There are numerous types of business accounts to choose from, each tailored for the unique needs of the business.

Keep in mind that most banks enquire about personal finances before they can grant any business banking services to you. Your business bank account application is less likely to be accepted if you have a poor credit history. Be careful; do not enter any incorrect information when making a business bank account application.

Can You Open a Business Bank Account Online?

While you will be able to start the process of applying for a business bank account on the bank’s website, most major banks don’t give customers the option of opening an account online. You still have to meet a bank representative in person. You will be required to provide the documents listed above as well as any other details the bank might want to know about the nature of your business.

Opening a UK Business Bank Account for a Foreign Based Company

It’s possible to open a business bank account for your business if it has an overseas corporate identity. A lot of banks in the UK offer ‘international’ accounts, which are specifically designed for businesses based in other parts of the world. Banks such as HSBC, Lloyds, Barclays, and NatWest among others offer international accounts.

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Financing Your Business

The process of securing funds for your business, especially when you are just getting started, can be disappointing. But knowing what options are available and how you can access them on short notice can prove crucial for business development. Here are five ways to raise finances for your business:

Angel Investors: An angel investor is someone who provides funds for a business in exchange for some equity in the company. Angel investors usually stay out of the day-to-day running of the business. The amount you can get from an angel investor depends on the value of your company and how much equity you are willing to sacrifice.

Government Grants: In the UK, government grants are meant to support new businesses, those in certain parts of the country, or certain sectors of the economy. The government uses a certain criterion to determine the type of businesses that can benefit from these grants, be sure to check them out.

Crowdfunding: Crowdfunding can be a great way for a new business to raise money. You pitch your business idea online and offer perks or rewards if your investor target is met. However, you’ll need an appealing idea and rewards to successfully raise funds through crowdfunding.

Business Overdraft: Business overdrafts are also an option when it comes to raising money for your business. They work just like personal overdrafts, and the amount you can access depends on the company’s credit record and finances.

Business Lending: This is available for start-ups that need funding to get their business up and running, as well as established businesses looking to expand. Depending on your situation, your business can borrow amounts ranging from £1,000 to £3 million with a business loan.

If you want to grow your business and reach new heights, you’ll need to get some extra funds. As you can see, the government, members of the public, hedge fund managers, individual investors, and high street banks can all offer business finance. Amounts, costs, and terms of the investment all depend on the type of financing you choose.

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Choosing a Bank for Your Business Current Account

If you are looking to open a business bank account in the UK, there are many options to choose from. It’s highly likely that even your current bank offers business bank accounts. In that case, you may choose to open a business account with them for your convenience but that’s, by no means, necessary. Here are the key factors to consider when choosing a bank for your business account.

Fees: Most business banks have a monthly fee as well as other charges for certain transactions, such as cheque deposit. Before choosing a bank for your business account, have a good look at the charges. How competitive are the bank’s rates? Expect to pay £5 on average to maintain a business bank account.

Available Features: Does the bank offer useful features, such as an app, to make the customer experience smoother? A banking app for your business account, for instance, helps you avoid making hasty, uninformed financial decisions.

Customer Service: Go online and look at the customer reviews to get a general idea of how the bank treats its customers. Look for a bank that you can contact at any given time and talk to professional who understands your business needs.

Overdraft Facility: Your business bank may be able to lend you money via an overdraft, just like your personal account. Do some research on how much the bank is willing to lend, the interest rates, and the fees they charge for the overdraft.

Foreign Transactions: You will need a bank that can process transactions in foreign currency, especially if you deal with overseas clients in your line of work. If this is a service you need, be sure to confirm that it’s available before you sign anything.

Telephone Banking: Is it possible to transact over the phone? You might want to look elsewhere if you find that speaking to someone when you need to is too difficult with a certain bank. After all, running a business is already a time-consuming undertaking without having to physically visit a bank branch whenever you need to talk to someone.

Ease of Switching Accounts: Consider the ease of switching accounts when choosing a bank for your business account. Just like with any other business deal, it’s always worth shopping around to make sure that you are getting value for your money. Even after you open the account, you need to keep checking and reviewing whether or not you need a better deal from a different provider.

Types of Banks

There are many types of banks in the UK. The one you choose for your business account determines the benefits and services your business gets access to. Keep in mind that some banks work in more than one area. For instance, some banks offer business accounts, personal accounts, and much more. Here are the most common types of banks:

Retail Banks: Most people in the UK are familiar with retail banks. They are the most common type of bank in the country. These banks focus on the consumer, or the general public, as the customer. Individual checking and savings account are held at retail banks. Retail banks have multiple branch locations in populated areas, where they offer loans and provide credit cards.

Commercial Banks: Unlike retail banks that focus primarily on the general public, commercial banks focus on business customers. Just like individual consumers, business entities need checking and savings accounts, too. Commercial banks are bigger than retail banks, in terms of the number of transactions they process as well as dollar amounts.

Investment Banks: An investment bank is a type of financial institution that helps businesses, governments, and other entities with capital creation. They purchase large holdings of newly issued shares and resell them to investors. Businesses often use investment banks when they want to go public or sell the debt to investors.

Neobanks: Neobanks are financial technology companies offering digital or mobile-only financial services. They are just like regular banks in the sense that they provide all the services you’d get in a typical bank such as checking and savings account, loans for businesses and individuals, as well as payment and money transfer services. The only difference is that Neobanks don’t have any physical branches whatsoever.

How Neobanks Work

A Neobank is a new type of financial institution that only exists digitally without any branches. Neobanks emerged in the UK in 2013 through FinTech players such as Atom Bank and Monzo. Neobanks are usually not associated with any traditional banks. Transactions are 100% digital and on mobile platforms. Neobanks use mobile applications to facilitate account administration and credit cards.

While they may not offer the wide range of services established banks offer –yet, Neobanks offer great features you wouldn’t find in a traditional bank to help you save money. For instance, these digital banks use artificial intelligence to track the customer’s spending behaviour and send a warning if you are on the verge of running out of funds before your next payday.

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Payment Method for Your Business

 

There are multiple ways in which merchants can accept payment for goods and services from their customers. Similarly, there are many types of payment methods a business can use for each type of payment. As a business owner, it’s important to make sure that you choose the correct method for each payment type. Common payment methods include:

Cash: Cash payments are very popular in the UK. Typically, they are used for small-value transactions. This is mostly due to security concerns. Having large amounts of cash in your business premises is a security risk.

Cheque: As a payment method, cheques are costly and take a lot of time to clear. For that reason –along with the ease of electronic methods –paying by cheque is becoming less and less frequent in the UK.

Vouchers and Gift Cards: These two are a great way for businesses to promote their brands and attract new customers. Gift cards and vouchers can also increase sales on special occasions such as birthdays and holidays such as Christmas.

Money Order: Businesses can also use money orders as a payment method. Money orders are prepaid and can’t bounce due to insufficient funds. They can, however, bounce for other reasons such as suspected fraud.

Bankers’ Automated Clearing Services (BACS): Bankers’ Automated Clearing Services can also be used as a payment method. BACS payments are sent from the bank system to the bank account of the recipient and are mostly used by businesses to pay staff.

Offering your customers with multiple payment methods can boost your sales. Other common payment methods include direct debit payments, credit card payment, and mobile payment methods. Each method of payment has its pros and cons.

Factors to Consider When Choosing a Payment Method for Your Business

Business Model

Consider your business model when choosing a payment method. Do you process one-time payments predominantly or does your business have a recurring billing model? Ensure that your choice of a payment method satisfies these basic parameters. If you have subscription customers, make sure that you factor in the complexity that comes with it.

Purchase Mode

Do you run an online or offline based business? If your customers primarily checkout offline, focus on using offline payment methods such as cash on delivery and limit online options –and vice versa. If it’s both, choose a healthy combination of the most popular online and offline payment methods among your customer demographics.

Location

Location is an important factor when it comes to choosing a payment method. Always choose a method that complements the location of your customer base as well as the business’s country of incorporation. In the UK, for instance, cash, credit cards or mobile payment are very popular for in-store purchases.

How to Accept Credit Card Payments

As mentioned above, credit is one of the most popular payment methods in the UK. For that reason, business owners should make sure that they have a credit card as a payment method in their business transactions. However, complicated processing fees scare businesses from accepting credit cards. Here’s how to accept credit cards in your business:

Choose a Point of Sale (POS) System

A POS system is an application that uses transaction data to streamline the day-to-day operations of a business. A POS system is a combination of hardware and software working together. It combines several managerial components into one application that you can use as a central hub for managing your business. Some POS systems have built-in processing payments to accept credit cards.

Get the Necessary Equipment

The way your business accepts credit cards will depend on where the payments are coming from. You must have a card reader and a merchant account to accept credit card payment in-store. Card reading equipment will allow your customers to swipe the card to pay. You don’t need any physical equipment to accept credit cards online.

Select a Merchant Account

A merchant account is a bank account into which you transfer money from the customer’s credit card purchases after they have been processed. Businesses cannot accept credit card payments without a merchant account. There are two options to consider: you can choose traditional merchant services that require third-party payment processing or an all-in-one solution with built-in merchant services, payment processing, and POS.

If you sell in-person, all you need to accept credit card payments is POS, card-reading equipment, and a merchant account. If you sell online, you will need an e-commerce site, a merchant account, and a payment getaway to encrypt or secure credit card information and send it over the internet for approval via the merchant service. Many merchant service providers such as Cayan, PayPal, and Square include a payment getaway with their service.

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Setting Up Your Business

If you own a business, you know that dealing with the legal side of things can be difficult and stressful. There are rules and regulations to adhere to, failure to which you’ll have a lot of problems with the regulatory authorities. There are a number of things that determine what you need to do to set up, including the type of business, where you work, and whether you take on people to help. Here are some important factors to consider before and after launching your business:

Registration

Most businesses register as a sole proprietorship, limited company, or a partnership. If you are registering a limited liability company, you won’t be able to use the name of an existing company or one that may be considered illegal or offensive. There’s a broad range of laws to consider, you’ll need the help of a solicitor to register your business.

Tax Liabilities

As a business owner, you have a tax obligation to fulfil. Writing your expenses down against your gross profit reduces the taxes that you have to pay. Hire an accountant to help you ensure that your tax obligations are met. If you have any queries, you can raise them directly with the Inland Revenue.

Insurance

Insurance is a major priority for your business. In fact, you should think of it as a necessity. There are certain coverages that the law mandates that you have, for instance, motor insurance, workers’ compensation insurance, and insurance mandated by any contracts that you have. There are also several others that you should take out for your own protection, including general liability insurance, business interruption insurance, property insurance, professional liability insurance, etc.

Patents, Copyrights, and Trademarks

The laws governing patents, copyrights, and trademarks exist to protect your products and the fruits of your hard work against competitors. A trademark helps identify your product in the eyes of the public. Patents and copyright laws keep others from using your work without permission. Your solicitor can help you understand these laws and how to use them to protect your business.

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Sending Money Abroad for Business

A modern business sends and receives funds overseas regularly. The days of only transacting within the domestic market are long gone for an increasing number of businesses in the UK. Below, we look at the top money transfer services in the UK your business can use to transact internationally. These are:

  • TransferWise
  • Azimo
  • WorldRemit
  • XE
  • Currency Fair
  • TransferGo
  • Revolut
  • Billon

Given that the UK is the hub of the modern FinTech industry, there are lots of options to choose from when it comes to money transfer services. The safety of your money is important. Check to see if the transfer service of your choice is regulated by the Financial Conduct Authority (FCA) –the main regulatory financial authority in the United Kingdom.

Choosing a Money Transfer Service

If your business has a lot foreign dealings, you should make sure that you have a reliable money transfer service. Due diligence is key when it comes to choosing the company that will be handling your funds in transit. Here are key factors to consider when choosing a money transfer service.

Safety: Safety is paramount when it comes to money transfer. When choosing a money transfer service, check if they are regulated by bodies such as FCA (UK), FinCEN (USA), and ASIC (Australia).

Sending and Receiving Options: Consider the ease of collecting the money sent. Strive to ensure that the recipient is able to collect the funds without any problems. What options are available in terms of pick up?

Customer Support: You may find yourself in need of urgent assistance when sending money abroad. Check to confirm whether customer support is available 24/7 before settling for a money transfer service.

Costs: When it comes to money transfer in the UK, transaction fees and rates vary from one transfer service to the next. Some services take a percentage of the transfer amount, while others charge a fixed transaction fee. Others allow customers to transact free of charge up to a certain amount. Compare different services to get the most cost-effective solution.

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