So you know what’s available, but who can provide it? Banks that offer business accounts in the UK can generally be split into three categories
The ‘Big four’
Who are they?
Barclays, HSBC, Lloyds TSB and NatWest. These four banks hold over 80% of small business accounts.
What they offer?
They will offer the full range of products. Bank transactions can be made either at your local branch, over the telephone or via the internet.
Where they distinguish themselves from other banks is the support that they offer their small business customers. Every customer is assigned a ‘relationship manager’. Usually based in the local branch, this person will be experienced in dealing with small businesses and will offer support and advice on general business issues as well as banking matters.
The banks often have a library of information on different industries and markets, which could be invaluable as you set up your business.
Banking with one of the ‘Big four’ will open up a range of funding options. From loans to leasing, your relationship manager will suggest which funding will suit you - and having built up a track record with the bank, you may be able to get favourable rates.
The bank may provide seminars or educational literature on various aspects of running your business. They often provide bookkeeping software (profit and loss accounts, cashflow forecasts) or sample business plans. And if you’re online, they all have a website offering information and services to customers.
The ‘Big four’ have received a lot of criticism recently for their bank charges. When compared to smaller banks, they seem to charge for everything from paying in a cheque to making a direct debit payment. And they don’t pay interest on their business accounts either, no matter how much you are in credit.
You may also feel uncomfortable with accepting advice from a bank manager who is clearly not an independent advisor. But it is worth remembering, that, although a bank manager will be keen to recommend the bank’s own products, it is not in their interest to give advice that will harm their client’s business.
Who are they suited to?
Despite the criticisms, the fact is that most small businesses bank with one of the ‘Big four’, if for no other reason than convenience. Despite the emergence of internet and telephone banking, many people feel happier having a local branch as well, where they can pay in money and talk, face-to-face, with their manager. If you run a shop or restaurant, having a local branch will be invaluable since you’ll be making regular deposits.
These banks also have a wealth of information and experience, which could come in very useful as you are starting up, as well as the full package of funding options.
So if you need these services, it is probably best to bite the bullet with banking charges. Try to see them as a business cost, in the same way as electricity and the rent, and make efforts to reduce them.