Compare business bank accounts

A business account is an account to manage your company’s finances. It can be used to monitor cash balances, make payments, and receive cash. It is the beating heart of your company’s finances. If your cash inflows exceed your cash outflows over the long term, your company’s financial heart is healthy and in good shape. Given a business account’s central role in your company’s financial management, it is important to choose an account that fits your needs.

The functioning of a personal account and a business account is almost the same. Both accounts are used to receive money, settle invoices, and store cash balances. The key difference is that a personal account is solely intended for personal usage, while a business account is designed to handle your professional or company’s transactions.

We at Swoop strongly advise you to keep your personal and business transactions strictly separated. When you manage your professional finances through your personal account, things become messy quickly. For example, are your telecommunication and internet expenses a personal expense or a business expense? The absence of a strict separation between your personal and your company’s finances can cause misunderstandings. By keeping the two strictly separated, you can avoid unpleasant, time-consuming conversations with your accountant or the tax authorities.

A business bank account is the most basic financial product you need for your company. Despite its basic nature, it is vital for your company’s long-term success. A business bank account has many benefits, such as:

• Professionalism: Your credibility instantly increases when you issue invoices with an “ABC Pty Ltd” tag instead of an invoice with “David Smith” as the beneficiary. Your suppliers might also take you more seriously when you operate through a business account instead of your personal account. Your enhanced image might help you secure better discounts and/or longer payment terms from your suppliers.
• Tailored to your needs: Choosing the right account can save you money. Some companies only need an account that allows them to conduct a few transactions. These accounts are typically free, but you must pay a fee for each additional transaction. Most banks also offer business accounts with more perks, such as unlimited transactions, digital banking capabilities, higher daily payment limits, optional overdraft facilities, and co-signatory authorizations. These accounts carry a monthly or annual subscription fee.
• Access to the broader banking system: A business account connects you with the banking system. It may allow you to deposit and withdraw money, deposit or write cheques, apply for loans or trade finance products.
• Time- and cost-saving integrations: Some banks allow for easy integration with ERP systems (Zoho, Deskera) or accounting software (Xero, Quickbooks). Being able to integrate your bank account directly with these systems or export your transactions can save your accountant a lot of time when they reconcile your transactions with the movements on your bank account. This will not only save them time, but also save you money. Some banks also provide access to an invoicing software tool.

There are several good reasons you should consider opening an additional business account or switch banks altogether.

• When companies are launched, the banking relationship is often opened with the owner’s personal relationship bank. Unfortunately, this implies that your business account might not be a good fit for your company. Your business might have grown, and your current bank might not be able to satisfy your requirements.
• It is always a good idea to diversify your banking pool. There is fierce competition between banks to attract new customers. You might find a better deal and save on banking fees by having a banking relationship with several banks. Some banks offer a higher interest rate on cash balances or charge considerably less for certain services. By having a banking relationship with multiple banks, you are no longer a price-taker because you will be able to compare their fees. Digital banks can often offer better conditions because they don’t need to pay for an expensive brick-and-mortar network. Also, some banks offer exclusive benefits for a limited time to attract new customers.
• Under the Financial Claims Scheme, deposits up to $250,000 are protected for each account holder, including corporate accounts, at each licensed bank. By having multiple accounts, your risk is spread over multiple banks.

There are many aspects to consider when choosing the right business account, such as the type of account, the number of transactions, online banking capabilities, proximity to a branch, customer service, and banking fees.

Each company has different needs and banking requirements, so it's difficult to recommend just one account for everyone. There is no one size fits all. You should consider the following factors when choosing a business account:

• Cost: Fees and charges will vary depending on the account you choose. Some business bank accounts are free while others charge monthly or annual fees. Free doesn’t necessarily mean you will be better off with this account. It will largely depend on the number of transactions you perform and the additional services you need. For example, it might be costly to deposit cash or cheques if it is not included in your package. International money transfer fees and currency conversion fees are other examples of bank charges that are not immediately visible when comparing the fees of various business accounts.
• Monthly transaction limits: It is important to understand how many transactions you may conduct monthly. If you need to pay for each transaction more than your basic limit, it might be more costly compared to paying for a subscription. Some business accounts are designed as a “pay as you go fee” structure. You pay a fixed fee based on your actual consumption.
• Daily payment limits: Ensure that the daily payment list of your card matches your spending patterns. Higher daily payment limits are usually associated with higher-tier business accounts.
• Expected service level: Some individuals prefer to manage all their finances online while others want to be able to walk into a branch. When you accept cash and cheque payments, you should choose a bank with a physical branch close to your location. If you are a service company, all your billings can be processed electronically. There is no immediate need for a branch in your proximity in that case.
• Size of business: The size and age of your business might also matter. Some banks are more reluctant than others to deal with small companies or startups. Especially banks with a big market share or with a certain reputation might refuse your business. Nevertheless, a business account is an essential banking product that poses very little risk for banks. There are certainly some banks out there that would like your business even if your credit is not great.
• International banking: If you regularly send money abroad or receive money from overseas, then look for an account that charges competitive transfer fees and exchange rates. Transactions in foreign currencies are one area where banks typically make their profits. If you frequently travel abroad for business, you also need to ensure that your bank doesn’t charge excessive fees for ATM withdrawals.
• Optional overdraft: Matching cash outflows with cash inflows can be a daunting task. An overdraft is a type of loan that banks offer to a company to cover cash shortfalls. You can constantly borrow and repay the loan, like a credit card, up to a certain limit. Cash shortfalls sometimes occur out of your control because of an unexpected expense or because your client is late in paying you. Unfortunately, banks don’t offer overdraft facilities to companies with a bad credit profile.
• Direct integrations to accounting/ERP systems: Several business accounts can be easily linked to accounting software (e.g. Xero, QuickBooks, and FreshBooks) or ERP systems (Zoho and Deskera). This is especially helpful to reconcile your bank transactions with your accounting records.
• Credit checks: Some banks only want to deal with good credits, especially the high-street banks. Credit checks are not a standard requirement to apply for a business account, but they occur. Check out our summary table to know which banks don’t require a credit check.
• Other financial products: Some businesses have specific financial needs, such as trade finance products or insurance products. If you don’t want your financial products to be spread across multiple financial institutions, you best consider this when you open your business account. Speak to us to find out about your options.

A good starting point when you are looking to open a new business account is our summary table. It gives you an overview of the features of the business account of our partners. That way you’ll be able to see which account fits your requirements best.

There should be no cost for switching business accounts or opening a second account. However, when you want to close your existing business account, you will have to pay off your outstanding debts (such as overdraft and credit card debts) before you can close it.

In case of opening an additional business account, you need to ensure that you have no commitment towards your current bank to route your finances through them. Especially if your current bank is financing something for you, they might have requested you to provide them with an assignment of proceeds. By sending your sales proceeds to another bank, you would be in breach of your loan agreement.

The most common bank account fees are monthly or annual fees, transaction fees, international transfer charges, interest expenses related to the utilization of the overdraft, and currency conversion fees. Fortunately, bank charges are deductible as an expense for tax purposes. While some banks will open a business account for free, others might charge you a one-off business account activation fee. Below we explained some fees that you might come across.

Monthly or annual account fee: A fixed fee that some banks charge for simply having an account with them. Some banks will waive this fee for the first year. You must understand what is included in your package.

Electronic transactions (in or out): Some business bank accounts include unlimited transactions, while other business accounts set an allowance per month and charge you for each additional transaction.

Cash or cheque payments (in or out): To deposit or withdraw money and cheques in a bank’s branch office, you might be charged a flat fee or a percentage fee. More expensive business accounts might include this service in their package.

International transactions: Sending money to another country or receiving funds from abroad is expensive. These transactions are usually processed through the SWIFT network. It is quite common to see a hefty international transaction fee on your bank statement.

International ATM fees: If you make use of your debit card while traveling, you can expect international ATM fees and currency conversion fees. Some digital banks allow you to withdraw money abroad up to a certain limit without having to pay an ATM withdrawal fee.

Overdraft facility: An overdraft is a very effective way to cover temporary cash shortfalls. Just like your credit card, it cost money to utilize an overdraft. Some banks might charge you an activation fee and they will charge you interest for utilizing the facility.

In the digital age, the opening of a business account can be done within a few minutes to a few days. If you act as a sole trader, it can almost be done instantly. If your business is a separate legal entity, the bank will not only require your personal identification details but also the details of your directors and shareholders.

While these requests for information are often perceived as annoying from a customer perspective, banks are strictly regulated and need to comply with anti-money laundry, counter-terrorism financing, and international sanctions regulation.

It is important to make sure that you notify your new bank about all your standing orders, including staff payments and rental fees. Standing orders are payments of a fixed amount you make regularly.

Direct debits are quite similar to standing orders, but the amounts fluctuate, such as a telephone bill or a utility bill. You must give your new bank a mandate to get all the information about the outstanding direct debits from your old bank. Your new bank will contact them on your behalf to ensure a smooth transition of all the outstanding direct debits.

It is also advisable to notify your regular customers and suppliers of your new business account details.

Rest assured this wouldn’t happen. Your previous bank would redirect any payments linked to your current account to your new bank account. This ensures you don’t miss any payments.

The answer to this question is quite nuanced. Some banks might be reluctant to open a business account when your credit history is not good. This is especially true when you are dealing with established, high-street banks that can cherry-pick their customers. However, a business account only poses a minor risk to a bank. Don’t let your bad credit history discourage you from trying to find a better deal. It is almost a certainty that some banks are interested in your business. Some banks are more friendly towards startups and entrepreneurs with less than perfect credit history.

The only real drawback is that with a bad credit history, you will be unlikely to get access to an overdraft facility. This type of facility involves actual cash and poses a risk to the bank.

If you are switching from one bank to another, you won't need to go through a credit check to apply for a business account. This is because a bank doesn’t provide you with any facility when providing you with an account.

However, if you want to access overdraft and trade finance facilities, your company’s credit history will play a role.