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Business Banking - Business Finance

 

Business Banking - Business Finance

 

About Business Banking

These are some of the questions you should ask when opening a Business Bank Account:

  • Is it just about looking for the highest rate of interest?
  • Why do I need a bank account?
  • Is it necessary to open a business bank account?
  • What type of account can I open?
  • How do I open a bank account?
  • Should I have monthly statements?
  • I have a bad credit record what can I do?
  • Can I bank a cheque in a different name to my account?


Is it just About Looking for the Highest Rate of Interest?

With a small business it is more prudent to look at charges as opposed to interest rates. Whatever your balance is in your bank, small business accounts will always attract charges. It is also wise to remember that great interest rates usually mean high penalty interest on overdrafts.

If you do want the best interest rates then look to an on-line provider. The providers are trying to tempt volume customers to use on-line services. They are not only trying to establish themselves on the Internet, but also have the benefit of having less costs for Net users: so that equals more profits for the providers - but in the short-term the profit is being handed back in the form of higher interest rates.


Do I Need a Bank Account?

Everything you do in business revolves around money. This money has to be identifiable at every stage of the transaction and of course the money also needs to be identifiable from your own finances. Opening a business bank account is the simplest way to achieve accountability and provide a good degree of transparency in your business dealings to enable government departments, creditors and auditors to assess your business. A business account will also give you credibility as your bank has assessed and accepted your business proposal.


Do I have to Open a Business Bank Account?

No you don't. If you are a sole trader or an informal partner and you have a personal cheque or deposit account, it is acceptable to have customers write their cheques to you personally and then for you to bank them in your personal account. Now this is obviously at odds with the above paragraph as there is no clear line or way to account for money attributable to your business: this is a big problem, but it can be done in circumstances where there is little choice.


What Type of Account Can Shall Open?

Open a standard cheque book account or current account. At this stage your only interest should be to create a facility where you can pay in cheques and withdraw money. You won't want a savings account for ALL the excess money you will accumulate in the first few months of business, nor do you want to take out business insurance usually with the banks commercial insurance arm.

If you are a sole trader you can open a bank account that will have your name and trading style i.e. Dave Jones trading as Jones Truck Services. If you intend to create a limited company you will need to have your limited company set up before your visit to the bank.


Opening a Bank Account

Your current bank is not necessarily the best bank to open your account with. There are a few reasons for this:

  • banks offer a different degrees of business start up accounts: some have no charges for two years, Internet banking, an instant cash card, 24 hour availability
  • keeping your business life away from your personal life will make sure that your bank is not in total control of your finances
  • a bank that does not have you using all of its products is very keen to offer the best deals.


Make an appointment with your bank they will probably want to see most of the following:

  • a business plan
  • where your start up finance is coming from
  • information about signatories and who are your partners
  • a rough breakdown of the business

if you are a limited company the bank may want to see your ‘Certificate of Incorporation’ for limited companies.


Monthly Bank Statements

At first you may get the choice of monthly statements, some banks may allow free weekly or fortnightly statements. Whatever the banks offer for free if it is not weekly then its not enough for you. It is better to pay extra than to estimate from monthly to monthly statement. If there is something wrong, a cheque bounced (returned unpaid), or a cheque stopped, a slight overdrawn situation you need to know quickly or risk high penalty fees. Banks don't allow free periods for penalty payments and only experienced bookkeepers can survive with monthly statements.


What Can you do If you have Bad Credit?

Business bank accounts are not as difficult as personal accounts to open. There are a number of reasons for this. Business accounts are profitable for the banks. That is not to say that anyone can get a business account, but if you have a business plan and it is viable, with the bank not having to fund you or provide you with anything more than a business cheque book, acceptance should be a formality. Paying in an initial amount of cash can only help.


On-line Banks
If you are comfortable using a computer and you feel confident enough to use and understand on-line banking it has to be a solid choice. The charges for paying in cheques and withdrawals should be less than a standard bank account.

 

List of Business Finance Providers

 

OCIS provide general financial information, we urge you to consult an Independent Financial Adviser ( IFA )
before making any important decisions about your finances.

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