So, you have successfully registered your small-scale enterprise and completed various other tasks required to start operating your newly founded business?
There’s one more thing that you might have missed out on or maybe you are wondering what the best way to go about it is. And that is: opening a business account.
Finances are highly crucial to every business regardless of their scale of operation. But the importance of managing finances properly from the get-go reaches a whole new level for small business owners who already have limited capital. Therefore, opening a business account should be on the top of the mind for anyone who’s considering a new business venture.
If you are planning on your own company, you need to find the best banking options for small-scale businesses that offer the required services as well as products that will help sustain your startup financially.
However, before you go about searching and comparing the costs and fees of the most renowned banks in the UK, there’s something that you need to know.
Most small-scale enterprises are avoiding high street banks and looking for challenger banks or similar options for their financial needs instead.
Well, different owners have different reasons but most of them say that one or more of the following factors hold them back from choosing high street banks for their business activities.
- Long process and response times
- High costs
- Lack of products/services required for the business
- Fewer options available
Small-Scale Businesses and High Street Banks
The trend of SMEs shunning the top-notch banks started a few years back when a survey conducted by Advanced Payment Solutions (APS) revealed that approximately 60% of all small-scale firms steered clear of the big banks as far as securing loans or handling other monetary issues related to their business were concerned.
As it turns out, this large proportion of SMEs formed the major chunk of the client base for challenger banks that had sprouted not so long ago. According to the small business owners, the recently-created retail banks were a lot more suitable and supportive of their own business activities as compared to the services that they normally received from the big high street lenders.
However, this is the era of digitalization where things as simple as buying groceries or even opening a door for that matter are becoming heavily reliant on the use of the internet and mobile devices. Needless to say, business owners are also looking for better and more efficient ways of banking to speed up their operations and keep up with the fast-paced market. And this is exactly what has given rise to online banking options or to be more precise, mobile-based banking solutions.
The Challenges of Opening a Business Bank Account and How the Online Options Are Solving It
When it comes to opening a business bank account, owners of SMEs should look for better alternatives to the most prevalent big banks otherwise they might be better off not opening one at all.
The main reason behind it is that the high street banks do not just take a large number of days to process applications after they have been submitted, but they also require extra detailed and often unnecessary paperwork for validation. Rather than easing their business operations, this is likely to make the business bank account an additional headache for SMEs.
You want a credit card to buy supplies for your business? Be prepared to wait for around 16 days or more until you receive one.
Many businesses often have to wait for almost a month before their application can be approved which means that your transactions are greatly delayed as you cannot make or receive payments in your business account. Not only can this hamper your day-to-day business operations but also lead to heavy losses and a large number of customer complaints.
Consider my own example as proof.
I had been planning to open a new account for my own home-based business and finally decided to do it last week. Now I had heard a bit about how the big banks are notorious for their long wait times when it came to opening a business account for small firms. Still, I decided to give it a shot anyway. How worse could it be, right?
So, I called Barclays and told them what I needed. To my utter surprise, the representative said that it would take at least a week just for the account to open up. And the norm is usually about ten days! Add in a couple of more days after account confirmation until I receive my credit card and that sums up to about half a month of just ‘waiting.’
This is when I realized how worse the situation really is. A quick search for the best banking options for small-scale businesses led me to the Tide app. I downloaded it, filled in the required info (took about 3 – 5 minutes) and got my account details almost immediately. Within three days I received the credit card as well. And I got it all done form the comfort of my home only – no need of visiting the bank and waiting in queues.
And this isn’t just the case with Barclays.
HSBC, Llyods Bank, NatWest, RBS, and other big shots that come in close proximity to the ‘big four’ banks all have similar wait times and long and complex procedures.
Another reason why online options such as Tide are becoming increasingly popular while high street banks are being frowned upon amongst small-scale businesses is the cost associated with setting and managing a business account.
High street banks are raking in huge sums of money from SMEs under the pretext of monthly servicing fees, ATM charges, deposit fees, and whatnot. On the other hand, app-based solutions offer the same services and more at a much more reasonable price.
All in all, if you want to set up a business account and gain the most out of it, it’s recommended that you go for an online or app-based solution as they are the best banking option for small-scale businesses. It’s easy to use, saves you time and money plus allows you to manage your finances on the go.