Last week I finally bit the bullet and became a company.
While I’m hoping this is going to be the right decision in the long-term, I can confirm that in the short-term it’s a complete pain in the backside. More on all of these delights another time, though.
One of the first things I had to do once the company was set up was to get it a bank account.
When you’re a sole trader you can get along with using a personal account for your transactions without breaking any rules. I opened a separate account to make it easier to track when invoices had been paid (or hadn’t!) and then transferred money to my main account once a month like a salary.
You don’t have to do it that way, of course, but I’m glad I did now that I will actually have to pay myself an official wage; it means I know how much I can comfortably live on and has kept me in the habit of receiving one single block of money each month rather than just dipping into my account ad hoc.
But that, I’m afraid, is where the positives of this particular tale end. Because this tale, in case you didn’t see, is entitled: “Why do banks hate small businesses?”
Every 12 or 18 months I switch my current account – loyalty gets you nowhere, folks – and I am usually bamboozled by the array of options available to me. I can get rewards for having direct debits, cashback for buying groceries, a bonus for recommending a friend, special savings rates and £100 just for switching. Brilliant.
Business accounts? Not so much.
Firstly, why do small businesses have to pay to use banking services? I would imagine a business customer is probably more loyal and lucrative to a bank than an individual, so you’d think they’d be fighting for them. But, no.
For business accounts there are costs for depositing money, withdrawing money, transferring money, and probably even just for thinking about money. I’m probably in debt just for writing the word ‘money’ four times in that sentence. And you also pay a monthly fee just for the privilege of having a bank account.
If you’re thinking you’ll be rewarded for this outlay, then you’re very wrong. You literally get nothing – no cashback, no interest, maybe a cheque book if you’re lucky. I was offered an overdraft but had to pay to even apply. No thanks.
I found one firm offering fee-free banking for 25 months and set about applying, only for its website to crash. The customer service lady was incredibly friendly but, when I tried to revive my application the next day, the same thing happened. I abandoned the bank – it doesn’t bode well that it had failed me twice before I was even a customer.
The next best offering was 18 months free banking, which is fine for now, but I’ll have to remember to switch or I’ll start paying a monthly charge as well as all those other fees.
When I applied I was asked if I’d like a business savings accounts, too – why not, I thought, that seems sensible. The interest rate? 0.05 per cent.
That’s 50p for every £1,000 you save. Why does a bank even bother creating that account?
Depending on where you look for figures, it’s estimated that as many as eight out of 10 start-up businesses fail in their first year. Unnecessary and confusing extra costs such as 19p for depositing cash into your business bank account can surely be doing nothing to help the situation.
Banks love to offer great incentives to young savers because they know people are terrible at switching – we’re more likely to change our partner than our bank account, apparently. I would think the same is true of businesses: treat them well when they’re starting out and they will stick with you for the long-term.
Business banking is just one of many things about starting a company that seems far more complicated than is necessary. And, considering we’re moving towards a ‘gig economy’, I’m genuinely disappointed banks aren’t doing more to help.
Come on banks, start supporting small businesses.