SMEs are banking on better banking services

Small businesses are struggling to find banking services that match their needs, but there are new services available that may be better suited to startups.

A survey of small businesses by fintech platform Hedgeflows has suggested that some of the biggest problems include difficulties with international payments and inability to meet a bank manager when needed.

However, there are new banking services available for small businesses that often cost less and allow businesses to use apps and other software, and some banks offer introductory offers if you switch.

Switching banks can seem like a daunting task, but the process may be simpler than you think. There are also some safeguards in place for smaller businesses that may be comforting.

Deciding to move

There are a variety of things to consider when working out whether your business bank account is still right for you. 

New ‘challenger banks’ such as Tide, Monzo and Starling are becoming popular with small businesses, but if you require visits to a bank branch they will not meet your needs.

One thing to look at is monthly charges. Many banks offer an initial free period for business customers, but then drop this after a time, pushing up your costs. Some business accounts, however, are completely free.

Marie Brown switched from HSBC two years ago because the bank was charging her for holding the account for her website building business Beyond The Kitchen Table. “HSBC were charging us £6.50 a month plus £32 a year for a credit card which I never used, whereas there is no charge with Starling.  My account is always in credit, I don’t pay in cash, cheques, or anything like that.  In fact I don’t use a branch at all.  Starling has a great app which I use often,” she says.

Finding a new home

You can search for different business bank accounts on comparison sites such as Money.co.uk and Money Supermarket to find what services they offer.

App-based bank accounts are often free for small businesses, but they do not have branches and there is limited in-person support. There may be extra charges for day-to-day banking, so be clear on what is available.

Stella Coombe, who now banks with Starling, says that there is a £3 charge for depositing cash, but she can do this at the Post Office. However, the founder of craft business Polyester Saltburn adds that this is now more convenient than her former Barclays account which she switched from, as Barclays has closed the branch in her town.

“There was no advantage to keeping that account open. I also save on fees,” she says.

Making a change

If you find a better bank for you, the good news is that, if you are a smaller business, switching your bank comes with a safety net. Businesses with a turnover of £6.5 million or less can use a streamlined service known as the Current Account Switching Service (CASS).

This service is free and means that you are covered by the Current Account Switching Service Guarantee if anything goes wrong. This guarantee, which can be found here, sets an expectation that switching will take just seven working days, and will include switching your direct debits. 

After the switch, if payments are accidentally made to your old account they will be transferred to your new one for three years. Your saved details for payees will also be switched over, so you will not have to enter them again.

If it goes wrong

If anything goes wrong with a current account, the bank will have responsibility to put it right, and will also pay you any interest lost. CASS covers 99% of UK bank accounts, but do check it covers the one that you are switching to.

In the first instance, if there is a problem, contact the bank you have switched to to resolve the problem. If the problem continues, you can contact the Financial Ombudsman Service, to make a final decision.

Rosie Murray-West

Rosie Murray-West is a freelance journalist covering all aspects of personal finance, as well as business, property and economics. A former correspondent, columnist and deputy editor at The Telegraph, she now writes regularly for publications including the Times, Sunday Times, Observer, Metro, Mail on Sunday, and Moneywise magazine.