When should you open a business current account?

Many new business owners are unsure of when they should open a dedicated account for their business. Some self-employed entrepreneurs start their business from the kitchen table and use their personal accounts to manage their business finances. While this is perfectly acceptable, it could lead to a mix up in your personal and business finances. If your business has been trading for a while or you prefer to separate personal and business cash, it may be time to open a business account.

What is a business current account?

A business current account (BCA) is a bank account that is owned by a business or legal entity and is used for its day-to-day banking needs. The business current account is normally used by the business to receive funds in the form of cheques, electronic deposits and cash, as well as to pay creditors. The bank also uses the transactions on a business account to calculate the business’s turnover and offer credit facilities based on this when needed. Banks generally offer special business banking accounts for small business, different from those for larger or commercial enterprises, with each account offering services tailored to the business’s specific banking needs.

What is the difference between a business bank account and a personal current account?

The basic difference between the two accounts is their use. A personal account is owned by an individual and is used to pay for living expenses such as groceries and entertainment. A business account, on the other hand, is tied to a trading business and can only be used to pay for expenditures of the business itself. Business accounts are subject to different rules and regulations and are often a requirement in order to access business-specific products such as loans. Depending on the size and nature of the business, it is often required by law that the business should have its own separate account.

Do you need to have a business plan to open a business bank account?

In most cases, banks will allow you to open a business bank account without asking you to show them your business plan, but it is important to have one ready in any case. When you apply for business banking products like an overdraft or loan the bank may request that you show them a detailed business plan before they can consider granting you access to certain products.

Do banks offer any advantages to business bank account holders?

Yes, most have a rewards programme for their business banking customers. Many business banking accounts include convenient features like online banking that lets you do transactions without needing to visit the bank. Many banks offer this service for free to their small business customers as a way to motivate them to increase their turnover. Most of the time businesses simply have to register to use internet banking and mobile apps, and then enjoy being able to bank on-the-go. Many banks also offer current account packages that are charged at a set monthly fee and include specific transactions like cheque deposits and cash withdrawals. Using the advantages that banks offer can make your banking experience much easier.

Do banks issue payment cards to business banking customers?

Banks can issue debit and credit cards to business account holders so that they can pay for goods and services directly from their accounts. Debit cards can be used to pay for most services both locally and internationally, often at much lower tariffs when compared to other payment methods.

Can a small business use a personal bank account for business transactions?

Many people choose to use one account for themselves and their business at first. While this is not always a bad thing, it can make keeping track of money difficult. Many banks will not take transactions on a personal account into consideration when you apply for working capital loans or an overdraft facility. In general, it is best to have separate accounts for your personal and business finances. If your business has a very small turnover, a separate current or savings account might be all you need. Nevertheless, having two accounts will make your life much easier and keep you out of trouble with your financial services provider.

How long does it take to open a business current account?

Opening the account shouldn’t take too long provided that you have all the required documents ready. Every bank’s application process is a bit different but most banks should have your SME account up and running within a few minutes. You may have to wait a while to get your payment cards delivered, but they are usually posted to you. When you apply for an overdraft or business loan with your account it may take a bit longer to finalise the procedure. In most cases, you should have a fully operational business bank account within a few days of application.

How much money can be deposited into a BCA?

Normally there are no limits on the amount of money that you can deposit into your business account. Because your turnover is a sign of how healthy your business is, it is actually a good thing if you deposit more money into your account. Many service providers offer customers with bigger annual turnovers discounted tariffs and other incentives. As a business owner, you should be aiming to keep your deposits and annual turnover as high as possible. You can track the amount of money deposited in your account with your mobile app or online banking so that you are always on top of your banking.