Best Business Bank Account for Startups

Share Post:

Choosing the right business account and partner is one of the most important decisions a startup can make in its early business journey. With so many players in the market, it is safe to say it will not be an easy choice, and your work is cut out for you.

No matter the startup size, you want a business bank account capable of meeting your specific needs and avoiding unexpected banking interruptions. Sometimes, having a business account in multiple institutions can help. Whether you want one or multiple accounts, you will need to look through several options to find the right one.

This guide looks at some great business bank accounts with various institutions that might be good candidates for startups.

What is a Startup Business Bank Account?

A startup business bank account is a bank account specifically for new companies. Such accounts often have features and discounts to reduce operating costs, such as waivers for monthly and daily banking transactions for the first year to make it easier for your business to get off the ground.

A business bank account is vital in helping you keep your company finances separate from your personal finances. The account also comes with additional features that make it easy to pay employees, suppliers and customers, and you can also use it to send and receive money for your company.

Typically, sole traders don’t have to open a business bank account. But as a limited company, you will need it.

If you conduct a lot of business abroad. You may want to open an account that can handle foreign currency transactions, making it easier to transact. This is one of the many considerations necessary when opening a business bank account.

Why Startups Need a Business Bank Account

Startups need a business bank account for several reasons:

It’s a Legal Requirement

Once you register and incorporate your business at Companies House, you need to open a separate business bank account. At that point, your company is officially its own legal entity, so you can’t combine your personal and business finances.

This requirement doesn’t apply to sole proprietorship. However, opening a separate account for your business still makes sense.

You Want Accurate Accounting

One of the primary benefits of using a business bank account is that it simplifies your accounting and bookkeeping. With a separate account, you have a clear transaction history of your revenue and expenses to gauge your profit. Having a business bank account will also simplify your taxes and make it easy to deduct expenses while keeping clear records.

You Need to Accept Multiple Forms of Payment

Business bank accounts have many features to help you manage payments from clients and customers and send payments to suppliers and other service providers. The account can be integrated with other platforms, making it easy to manage your invoices and other transactions without manually inputting transactions into your payment or accounting software.

However, certain requirements, such as the opening deposit and a daily balance, must be met to open a business bank account. These requirements might be difficult to sustain if you’re just starting out. Luckily, some challenger banks have come up, and as you will see, these have great features for businesses and can be a great alternative if you don’t qualify for traditional banking.

Types of Startup Business Accounts

Startups looking for business accounts have several options to choose from, depending on their needs. Common types of startup business accounts include:

Business Savings Account

This type of account is designed to help your business save and grow its funds. It offers competitive interest rates and benefits and is ideal for setting aside money for future investments, expansion and emergencies.

Business Checking Account

This is the account your business can use for everyday financial transactions, such as paying bills and receiving payments. It provides easy access to funds through cheques, online banking, and debit cards. It is suitable for managing day-to-day expenses and ensuring liquidity.

Business Merchant Services Account

Designed for businesses that require payment processing services. It enables you to accept customer credit card payments, which is essential for e-commerce, retail and service-based businesses.

Business Credit Card

This is not a typical business bank account but a line of credit for business expenses. It is one of the ways the business can use to manage cash flow and track business expenses more efficiently. The credit card has various rewards and benefits tailored to suit the business’s needs and financial goals.

Business Line of Credit

This account provides a flexible source of short-term financing for the business. It helps cover unexpected expenses or manage seasonal fluctuations. With this type of account, interest is only charged on the amount used.

Your startup doesn’t need all these accounts at once. As you grow and your financial needs change, you can keep adding the accounts as necessary. However, a checking and savings accounts are the best places to start. 

Some Useful Banking Features Startups Should Look For

As you go through the list of the best startup business bank accounts, it’s crucial to know the features you should look out for. This will help you identify the right institutions and accounts for your business.

Some useful banking features startups should look for include:

  • Invoice tracking
  • Good integration with your accounting software
  • A well-designed mobile app
  • Phone notifications
  • 24/7 customer service
  • Expenses management
  • Free banking period or no monthly fee
  • Overdraft facility
  • Reporting features

Best Startup Business Bank Account

Pay iO

Pay iO is a common challenger bank always associated with business banking. It’s one of the few challenger banks that specialises in offering business-focused services, while in other cases, the service is an offshoot.

Pay iO has features catering to small and large startups with operations locally and abroad, respectively. Being a business-centric financial services provider, Pay iO’s range of features focuses on financial solutions that are efficient and effective.

The Pay iO business account gives you vital features such as a mobile app and web access. The interface of both platforms is easy to use and has a simple layout that makes it easy to manage your finances. The mobile app is available for Android and iOS platforms and provides the benefit of accessing your account anytime.

Pay iO allows your small startup to get payments directly from your customers and manage your transactions and expenses all in one place. If you don’t qualify for a traditional bank account or don’t have all the requirements, a Pay iO business account would be a good place to start to ensure you have a professional image and a convenient location for your finances.

Larger businesses with operations outside the United Kingdom can benefit from additional features such as global payments, convenient account management with tools that reduce administrative time and effort, multi-currency accounts and competitive exchange rates at the real mid-market conversion rates.

Pay iO provides you with a digital wallet with dedicated bank details and a business card that allows you to access funds quickly, hassle-free and fully online.

Online businesses can also leverage other crucial features, such as Open Banking, using ready-made plugins that make integration easier.

Whether you’re operating a small establishment or a startup that expects to grow rapidly, Pay iO has just the right features to support your business and grow with you.

Revolut Business

Revolut is an app-only business bank account that offers complete services, providing businesses with functions such as easy global payments at great rates, multi-currency accounts and everything you would expect from a business account.

What makes the Revolut Business account appealing is that the account is free for the base tier. You can upgrade to other premium options at very competitive prices as your needs expand.

Choosing a paid-for plan gives you access to more features and greater currency exchange limits. But you’ll need to consider whether you need to upgrade or you can get the services and features you need using the free plan.

Like other challenger banks, the requirements for a Revolut Business account are minimal, and it is easy for most startups to meet and open the account. Once the account is opened, Revolut offers a range of security and protection features such as pins and passwords and a randomly generated number code with every login. All card transactions are protected by Mastercard and Visa terms and conditions.

Other notable features include no monthly fees, and you get up to give free local payments each month and competitive prices after that, no charge for sending money to other Revolut accounts, and you get a multi-currency account that can hold more than 28 currencies.

The Revolut business account is available online and via the app, providing you with unlimited access to your funds whenever and wherever. You can access Revolut support by email or in-app chat with priority for premium accounts.

Pros

  • Free account option
  • Ability to have multi-currency accounts
  • Get physical and virtual debit cards
  • Links to your accounting software
  • Competitive pricing on paid plans
  • Multi-currency account holding over 20 different currencies

Cons  

  • No option to deposit cash
  • No overdraft facility

Tide Business Account

Tide is a straightforward business bank account that is perfect for small startups looking for convenience and low overheads. It has a mobile app that enables you to track your business transactions with ease. Using the app, you can also send, pay, follow up on invoices, and upload receipts as necessary.

The Tide business bank account can be integrated with industry-leading business accounting software like Quickbooks, Xero and Sage to make your life easier and save on administrative costs and time.

Like Revolut, Tide also has a free plan, which is perfect for small startups with a tight budget. With the free plan, there’s no monthly fee to pay, but there’s a small charge for each outgoing and incoming transaction. You also incur a withdrawal fee. This means the account might not be ideal for businesses that want to transact regularly.

The alternative is to go for the paid-for plan: Tide has three. These give you additional features such as a 24/7 legal helpline and exclusive member perks. Also, if you want to register your startup as a limited company at some point, Tide will pay the incorporation fee on your behalf to help you get up and running. You will also get the Tide Accounting software free of charge for six months. These bits of perks could make a lot of difference for businesses looking to save as much as possible.

It might also help to know that your deposits on Tide are FSCS-protected and backed by ClearBank. This is not the case in most challenger bank business accounts, but they do have other methods of protecting your deposits, such as safeguarding.

Should your business goals change and you want to open a savings account, Tide offers instant access to a savings account with a 4.33% AER.

Pros

  • Tide offers a free business account option with no monthly fee
  • There’s an introductory £50 offer cashback when you deposit £50 within 3 months after opening the account
  • Fee-free spending in the UK and abroad
  • Great app, and the application takes minutes
  • FSCS-protected bank account provided by ClearBank
  • Over 450,000 UK businesses already use Tide

Cons

  • No overdraft facility is available
  • £1 ATM withdrawal fee

CashPlus

CashPlus offers two types of business accounts for startups. These are the “Go” account and the “Extra” account.

The Go account has no monthly fees and has a card issuing fee of £9.95 and £2 for each ATM withdrawal. The Extra account is £9 a month, with no issuing fee, and you get free withdrawals. Being a challenger bank account, the account opening time on CashPlus is quick and easy. Both account options are good choices depending on the needs of your business, but the Go account might be the better choice for entry-level small businesses looking for no monthly charges.

With the account, you get a lot of tools that are especially helpful for companies. Consider upgrading to the Extra account if you want additional benefits like the credit builder feature.

The credit builder is a vital feature that more startups could benefit from. It allows the business to build its credit score and source credit from traditional banks with more competitive rates.

The CashPlus account also allows you to process various types of payments, such as Faster Payments and BACS.

Another reason CashPlus is an excellent account for startups is that it is a fully regulated challenger bank with FSCS protection. You don’t have to worry about risking your deposits because they are protected. Once you open the account, you will get an account number and sort code, and the account is available to all businesses, including those with no credit score.

Pros  

  • No credit checks needed
  • Access your account through the app and online
  • Free introductory offer saves you £9.95 card issue fee
  • UK-based customer services
  • Get free monthly transfers with competitive transfer fees after the free transfers are depleted.

Cons  

  • The account is ideal only for local businesses
  • Doesn’t offer multi-currency accounts

HSBS Kinetic Account

Online banks have taken precedence for business bank account openings for startups because of their flexible and achievable requirements. However, for Startups that meet the requirements of one of the leading high-street banks in the UK, HSBC, there are plenty of reasons to consider opening a business account there.

HSBC is the largest bank in Europe, with over 500 offices in over 80 countries, which means something for businesses looking for a reputable bank to work with that is trustworthy. Like other high-street banks, HSBC is regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

The requirements for opening a business bank account on HSBC are not stringent, and it is possible to open an account online.

You’ll need the following documents to open a HSBC Kinetic business bank account:

  • Valid photo ID – You can use your driver’s license or passport
  • Proof of business address – a bank statement or utility bill works
  • Business registration document from Companies House
  • Turnover – for startups, an estimate is fine
  • Directors’ addresses and key information such as names, dates of birth, contact details, etc

The HSBC small business account has no application fee, and the business can enjoy up to 12 months of free access with no account charges and then £8 per month. Bank transfers are free on the account, and ATM use is also free within the UK.

The business will also have access to credit facilities such as overdrafts that could be a lifeline for the young business. Once the account is up and running, you can access it through the HSBC Kinetic App, which gives you access to the account at any time of the day.

Starling Bank Business Account

Starling Bank provides an award-winning solution suitable for startups that are registered as sole traders, limited companies and partnerships.

The account comes with no monthly fee or transaction charges but comes with the option of adding accounting tools and multi-currency features at a monthly cost.

One of the outstanding features of the Starling business account for startups is that it allows for cash and cheque deposits, which the majority of challenger bank accounts don’t.

The account is also regulated by the FCA, and the funds are protected by the FSCS because Starling is a fully licensed bank. Additional safety and security features include PIN, Password or touch ID access and instant notifications that warn you of unusual activity to protect you against fraud. You can also use the app or online access to freeze your cards and set spending limits via the Starling app.

Purchases are protected by 3D security, meaning you will receive a notification to authorise payments using just one tap.

Like many challenger banks, the requirements to open a Startling Bank account for startups are minimal, which makes the account highly accessible. The requirements include:

  • Be a sole trader, or limited company with no more than two owners
  • Be UK residents
  • Be a UK-based business
  • Have an Android or iOS device
  • Have a UK phone number

After opening the account, you can access vital features and services such as overdrafts of up to £50,000 with varying interest rates. This business toolkit add-on provides you with additional features such as bookkeeping that are useful for a business without an accountant.

Using the business toolkit add-on, you should be able to:

  • Create and send invoices and match payments with a single click from your desktop
  • View automatically categorised expenses and transactions with tax information
  • Get tax bill estimates for sole traders who pay by self-assessment
  • Record and submit VAT estimates through Making Tax Digital, which has the ability to automate some processes.
  • Upload bills and schedule payments

NatWest Startup Business Account

NatWest is one of the big four high-street banks and is the largest bank for business banks, providing business accounts to one in four businesses across the UK. Established in 1968, they have experienced substantial growth since entering the market.

NatWest offers an extensive branch network and multiple business accounts from which startups can choose. There are no monthly account fees, and businesses can get access to their highly-rated mobile banking app for easy management of funds and their account.

When opening a NatWest business account, you can choose from three options of current accounts available at the bank. These are:

  • A free mobile account through their banking app Mettle. This account is ideal for sole traders and limited companies with no more than two owners looking to be bank-free and hassle-free.
  • A startup account for businesses that have been trading for less than 12 months and have a projected annual turnover of less than £1 million. Under this account, the first 18 months are fee-free.
  • A business account for startups that have been around longer than a year and have a projected turnover of more than £2 million. With this account, you can access specialist business support with a dedicated account manager.

To be eligible to open a NatWest account, you must:

  • Be a sole trader, partner or director
  • Have the right to live in the UK
  • Provide proof of address
  • Be at least 18 years old

More specific eligibility criteria depend on the account you choose based on your annual turnover and business age.

With the NatWest business account, you can get access to overdrafts of up to £25,000 for businesses that have a turnover of less than £2 million for 12 months, and you can borrow up to £50,000 if your business’s turnover exceeds £2 million.

When your startup starts generating surplus cash, you can open a NatWest savings account, which also comes with various perks and benefits for your business.

NatWest also has a suite of financial tools and products that your business can use to ease the administration process and save time and resources. These tools can be integrated into your account for more accurate bookkeeping.

Now that you have an extensive list of the best business accounts for startups in both challenger and high-street banks, complete with the benefits that each offers, finding the right one that matches your business and financial needs should be much easier.

Key Things to Look for in a Business Bank Account

When picking a business bank account, you should ensure you understand all the features and costs and make sure they match your startup’s needs and finances. Some of the key things you should look for and seek to understand when opening the account include:

Fees

This is one of the main factors that affect which business account to open. Most business bank accounts will charge monthly fees and also charge a fee for certain types of services such as international payments, ATM withdrawals and deposits. On the surface, these fees don’t seem much, but for businesses with a high transaction rate, they can easily add up and become substantial. It’s important to compare the fees and determine the likely costs for your startup business.

Features

Most business bank accounts we have listed have all the features you need to run and manage the finances of your startups conveniently and efficiently. But if you have more specific features you’re looking for, you can look for business partners that offer this. If you’re after convenient features, you’re more likely to find success with challenger banks, with some even offering overdraft facilities.

Digital Integration

Look for accounts that offer seamless integration with accounting software and other financial management tools. This connectivity can simplify bookkeeping, tax preparation and financial planning.

Additional Features

Consider additional features and services offered, such as merchant services, business loans and overdrafts, and credit card processing. You might not need these services and features immediately but after some months. Going for an account with these services saves you from opening an additional account with a different institution that offers the same features.

Accessibility

Evaluate the accessibility of the bank and the account. Consider the branches, ATMs and availability of online and mobile banking options. The ideal account should be accessible 24/7, regardless of your location.

Security and Safety 

Whether you’re planning to keep large amounts in your account or just deposits from your daily earnings, the safety and security of the deposits are paramount, and you should ensure your money is protected. Most accounts come under FCSC, which protects your money up to £85,000 in the UK, while others use different measures such as safeguarding to keep your deposits safe.

Check Offers

Companies have introductory offers for startups, such as banking, for a certain number of months. These are good ways to cut, but you should always weigh the cost after the introductory period and ensure you’re happy with it.

Customer Support

Customer support is a vital tool to have when running a business bank account. Because many businesses are now fully online, having no branches means speaking to someone face-to-face may not be an option. High Street Banks may be your best option if you prefer walking in to speak to a customer support rep. However, an online app-only business account provides 24/7 customer support, which also happens to be more accessible and time-saving.  

The Bottom Line

Getting the right startup business account is a huge step in the right direction for your young business. The right financial partner is a great advantage that ensures you maintain liquidity and access funding when needed. Select a financial institution that aligns with your financial needs and goals and can scale with your business as it grows.

    Rapid Setup, Web & Mobile Access, FX Exchange

    Related Posts

    CHAPS Vs BACS

    by | Apr 13, 2024 | blog | 0 Comments

    CHAPS and BACS are the UK's most commonly used payment systems for transferring large volumes of money. They are commonly used between businesses and are also commonly...

    Best Business Current Account for a Construction Business

    by | Apr 13, 2024 | blog | 0 Comments

    Getting a current account for your construction business can be one of the most important things you do for your business. The nature of construction businesses, in...

    Best Current Account for Vape Businesses

    by | Apr 13, 2024 | blog | 0 Comments

    Running a successful vape business requires a reliable current account to process payments. While many businesses are spoilt for choice in the type of current accounts...

    Best Multi-Currency Account

    by | Apr 13, 2024 | blog | 0 Comments

    A multi-currency account can make it easier for businesses to pay for goods and services and receive payments from customers and clients from different regions. The...

    Best International Bank Account

    by | Feb 28, 2024 | blog | 0 Comments

    International bank accounts are an asset not just to businesses with interests outside the UK but also to expats, travellers and even students. If you constantly move...

    Best Business Bank Account for Startups

    by | Feb 28, 2024 | blog | 0 Comments

    Choosing the right business account and partner is one of the most important decisions a startup can make in its early business journey. With so many players in the...

    What is an EMI?

    by | Feb 28, 2024 | blog | 0 Comments

    Electronic money institution, EMI, or e-money institution is a confusing term for many people partly because it is not mentioned in any regulation or legislation. If...

    Best Prepaid Cards for Business

    by | Feb 28, 2024 | blog | 0 Comments

    Businesses must solve the challenge of fluid efficiency by allowing their employees to access cash for expenses while cutting back on wastage and unnecessary...

    How Do Business Loans Work?

    by | Feb 3, 2024 | blog | 0 Comments

    Finances are the driving force behind every business. At some point, the business will need more money than it can generate to remain afloat, fund an aggressive...

    Business Accounts
    For the Digital Economy

    Easily manage your everyday financial operations with your own business account. No branch visit needed. We execute both incoming and outgoing UK Faster Payments, BACS, Direct Debit and SEPA payments with all EU banks that support SEPA transfers

    Discover

    Sign Up