How to choose a bank for your small business

When you’re starting a new business, choosing the right business bank account is one of the first decisions you’ll make. The bank you choose will influence how easily you can manage your money, track your spending, get paid, and access support as your business grows. With so many UK small business bank accounts available, from traditional high-street banks to modern digital providers, it’s not always obvious which one is best for your startup.

If you’re a sole trader, you’re not legally required to open a business bank account, but it’s usually a smart move. Keeping your personal and business finances separate makes bookkeeping easier and helps you stay organised to make filling in your tax return easier.

When choosing the best business bank account for your small business needs, there’s plenty to think about. Many banks or financial platforms offer incentives, like free banking periods or cash bonuses, and others charge monthly account fees or ATM withdrawal fees.

If you’ve set up a new business and need to open a business bank account, this guide will walk you through everything you need to know. We’ll explain what’s required to open a business bank account, the key features to compare when choosing a business bank account, and how to feel confident selecting the best option for your startup business.

What do I need to open a business bank account?

Requirements vary slightly between providers, however most UK banks ask for the following documents and information;

Sole trader

You’ll typically need:

• Proof of ID (passport or driving licence)
• Proof of address
• Your National Insurance number
• Details about your business (nature of the business, expected income, etc.)

Limited company

You’ll usually need:

• Proof of ID for all directors
• Proof of address for all directors
• Companies House registration number
• Business details (industry, turnover, trading history)
• Possibly your business plan if you’re a new startup

Banks may also ask for:

• Your website or social media pages
• Proof of contracts or invoices
• Details on expected monthly transactions

This helps them verify your business and assess risk.

What to look for in a small business bank account

With many small business bank account options out there, figuring out what’s important to you can be a little tricky. Here are a few things you can look out for when researching your options.

Monthly account fees

Some UK banks or financial platforms charge a monthly fee for keeping the account open. For example, high street lenders, like Barclays, offer an initial free business banking period of 12 months, but after this ends, you’ll pay a monthly account fee. If you’re looking for a small business bank account with no fees, choose a provider like Tide, who won’t charge you any monthly fees for your account.

ATM withdrawal charges

Some banking providers charge you an ATM withdrawal fee of around £1, and some don’t. If you make regular cash withdrawals, finding a bank account provider that doesn’t charge these fees can help you save money.

Business credit facilities

Some financial platforms offer credit, i.e. a business loan. So, should you decide to access finance in the future, you can access the working capital to grow your business if you meet eligibility requirements. If you prefer a flexible alternative, a business credit card could also help you manage short term expenses.

Incoming and outgoing payment fees

There are some financial platforms that charge fees for receiving and sending payments from and to your bank account. If you only accept a handful of incoming electronic payments, this fee might not matter too much; fees can be around £0.20 per transaction. Something worth considering before signing up. If your business takes card payments online or in person, you may also need a merchant account. You can learn more about how merchant accounts work in our guide to the key things you need to know.

Banking apps

Signing up with a bank or financial platform that’s forward-thinking and innovative can mean you benefit from a better user experience. For example, you might be able to quickly and easily sign up for a new account via their app, manage your money effectively with different app features, or access live chat 24/7. Open banking technology underpins many digital banking tools to allow your account to securely connect with trusted apps and software.

Criteria

It’s always good practice to check the provider’s eligibility requirements; if you don’t meet their basic criteria, you can waste your time filling in an application. Most bank account providers want the recipient to be over the age of 18, be a UK resident, be a limited company, LLP, or sole trader and meet basic credit checks.

Free banking periods

Many providers offer new customers free banking periods; these periods are usually around one year long. Always consider the fees you’re expected to pay after this period before opening a business bank account.

International payments

If your business trades overseas, or you plan to in the future, it’s important to compare the costs involved in making and receiving international payments. Look at how much it costs to send and receive money abroad, and what exchange rates or hidden conversion fees you might face. Digital providers like Wise or Revolut Business are often known for more competitive international rates, while some high street banks may charge more for these services.

Overdrafts

Overdrafts can be handy, particularly when you’re starting a small business — unexpected costs can crop up regularly. Having an overdraft can help you in these situations. However, not all financial institutions offer them, so be on the lookout for this feature if it’s important to you.

If an overdraft is important to you, look for a provider that offers one and review the interest rates carefully. It may be useful to learn about alternatives to a business bank overdraft before considering this as a key factor when choosing a bank account.

Can I switch my business bank account?

Yes, if you’re unhappy with your current business bank account provider, you can easily switch to another, better deal. Whether you’re taking advantage of a joining bonus or your current free banking period has ended, switching bank accounts can help save you money and access better, more relevant banking features for your growing business.

Check out our guide to learn more about how to switch your business bank account.

Comparing the best small business bank accounts

Choosing the best bank account for your startup business is an important first step, but it’s just one part of managing your business finances. As your business grows, you may also need access to additional support, such as short term funding, working capital, or a business loan to help smooth cash flow or invest in new opportunities.

At Capalona, we make it easy for small businesses to find a wide range of business finance options in one place. If you’re ready to take the next step, you can find and compare business loan options today.