Finding a business banking service for a startup can be a long and arduous task. On the one hand, a personal bank account is normally not permitted for business transactions other than the paying in of wages, so straight away, a current account is off the table. On the other hand, a fully fledged, all singing and all dancing business bank account is not only going to be overkill, it is also going to cost the business unnecessary expenditure, thanks to monthly maintenance fees, high ‘per transaction’ charges and add-ons that will, 99% of the time, never be used. Business News Daily write of the many mistakes and pitfalls facing small businesses and startups; unfortunately, many of these are inherent to the ‘big bank’ culture as much as they are to the reliance many startups find they have to have on personal bank accounts.
However, with that in mind, there is thankfully a middle ground that is very friendly to startups. According to the Financial Times, one of the major gripes amongst businesses, both big and small, is that they feel there is not enough of an understanding for small businesses, and so customers fall through the cracks, needing an alternative to big banks, but wanting a professional service. Smaller banks such as Arro are now providing just that service. Within only a few days (sometimes the same day) any startup can receive a sort code, account number and the ability to start paying salaries. Not only that, the rise of these small banking facilities have also bucked the trend of high fees whenever the customer needs to use their bank. Fees are comparatively low, meaning that, if a startup needs to make an ‘ad hoc’ payment to a creditor or employee, they can do so without fear of having to pay a fortune for the privilege.
The other benefit of these smaller banks is that they rarely have a physical location, meaning that the range of facilities offered has to be available either over the phone, online or via social media, such as Whatsapp and even Facebook Messenger. One quick call, email, click or conversation on a smartphone and employees are paid and creditors satisfied.
However, with these banks, it is important to check the reputation, financial backing and business plan. Unlike major players in banking, many smaller institutions come and go over time, and whilst deposits are generally protected, there is nothing more frustrating than having funds tied up whilst waiting for a defunct bank to pay out, or having to distribute new banking details to all customers, employees, contractors because the previous bank have ceased trading. If, for whatever reason, the rug is pulled out from under the bank’s feet, it can be a distressing and costly experience.
That’s not to say the rise in these small banks is a bad thing. They make a perfect bridge in the gap between personal and premium bank accounts, and should really be the first port of call for any company wishing to dip their feet gently into banking.