Like in previous recessions, an increase of redundancies leads to people taking the plunge and making that ‘side hustle’ their main businesses.
Having opened more than 25 AIMS offices since the start of lockdown, one thing we’ve noticed is the struggle new businesses are having opening a high street bank account. Barclays and HSBC have suspended new applications, and existing applications have a long lead time. Metro Bank have suspended all new applications until 2021! This does seem to us to be rather absurd and could be an additional factor that hinders economic growth – after all, a bank account must be essential to most new businesses.
But why is this the case? And what alternatives does a business have if they do need to open a bank account? One of the issues for high street banks is the intensive resources these banks need for their onboarding process e.g. requiring in-bank interviews.
Online current account providers, such as AIMS partner Cashplus, have not had these same issues.
Cashplus’ Patrick Herrlinger told us “the big banks have a stodgy legacy and find it hard to implement change. Their application process is full of pain points – but we have got rid of most of those with e.g. with our mostly automated system for Anti Money Laundering and fraud checks at point of application.
“Businesses used to use an online Business Account like ours as a stop gap before their high street account was open, but more and more, those business owners are realising that our online account does everything they need and offers a far more streamlined process.”
Ultimately new businesses opening is good for everyone, so we want to help. An AIMS Accountant will always recommend setting up a separate Business Current Account to help keep your finances in order.
Some other tips for new business owners when it comes to their Business Current Account:
- Consider your credit history and profile: even a simple unpaid phone bill can lead to you being declined an account with a high street bank. Did you recently move house? So ensure all your finances are listed in one place only.
- Calculate the real fees: it is important for your cash flow forecast to understand a bank’s charge sheet once the ‘free period’ has finished e.g. to pay in cash on the high street costs 0.5%-1.5%. To pay cash online could be as low as 0.3%
- Does your business bank account integrate with your accounting software?
- Take advantage of specialist savings accounts for businesses with banks such as Aldermore and Shawbrook, where you can earn something back if you have to hold money aside for tax liabilities.