Despite the need to keep careful control of their finances, over half of businesses (53 per cent) have never switched their business bank account. Given the range of benefits offered by banks to new business customers, this means that many SMEs may be missing out on potential savings and a range of business-friendly features.
A new research partnership between the Current Account Switch Service and Small Business highlights the benefits of switching for small businesses and reveals the factors that would make them move their money.
The research also found that 14 per cent last switched over six years ago and 11 per cent between one and three years ago. Two per cent don’t remember when they last switched. It’s not that there are not new deals out there – but SMEs might not be looking for them.
Why should I switch?
There are plenty of reasons to switch your bank account, not least to deal with post Brexit life and recovery from Covid-19. Data from the Current Account Switch Service last year found that over one in ten SMEs (13 per cent) were dissatisfied with the support they received from their business current account provider since the pandemic began.
If you’re unhappy with your present bank – say, you’re on an expensive account or the customer service is poor – finding a new one through a price comparison website or small business organisation is quick and easy. A new business bank account might include free accounting software or a dedicated bank relationship manager. There are accounts that better cater for freelancers and accounts that cater for international trade; helping those who are looking for post-Brexit trading advice. Or, as your business recovers from the worst of Covid, it would be more beneficial to have an account with lower monthly or overdraft fees.
In fact, the CASS and Small Business survey reveals that having low or no charges on the account is the main reason (43 per cent) for businesses to switch banks. Cash or ‘freebie’ incentives on sign-up also sway 20 per cent of small businesses. It is great to get an instant reward for switching – but be careful to check the longer-term benefits are wheat you want rather than being left with something that doesn’t meet your needs once the introductory period is over.
On top of that, switching is quick and most UK banks are eligible. You can choose your switching date and the admin will be sorted out from there.
You can compare your options on Nerdwallet here.
Jo Ainsley, Senior Service Lines Manger, Pay.UK said: “The research shows that a startling number of small businesses have never switched business bank accounts. As SMEs move towards a new period of recovery and growth, ensuring they are with the correct business account provider is more important than ever.
“Our data also shows that 20 per cent of SMEs surveyed are still using a personal current account as opposed to a business account, meaning they could be missing out on the support and provisions a business account can offer. At the Current Account Switch Service, our objective is to ensure that businesses are aware of the potential benefits of switching bank account providers. In doing so, we are encouraging businesses to make informed decisions about how they bank.”
How the business current account switching process works
To use the service to switch your business account, you must have fewer than 50 employees and an annual turnover of up to £6.5m.
The next step is thinking about how you use your account and whether it has the right features for your business. Have a think about standing charges, interest rates and overdraft facilities.
You can download a PDF switching checklist from the Current Account Switching Service website.
Cancel your direct debits and standing orders that you no longer use. Payments will be transferred to the new account but it still makes sense to do this before you switch (though it’s wise to do it regularly) rather than transferring outdated information to your new account.
Have the information below ready:
- The name of your business
- Your trading address
- Funding requirements
- A Companies House registration number
- An HM Revenue & Customs certificate
- A recent utility bill or statement relating to the business
You may need to provide other documentation if you are a:
- Sole trader
- Limited company
- Pension scheme
Your new bank may also ask for personal documentation from directors and partners along with a passport, driving licence or bank statement. It’s best to contact the bank you want to switch to in advance to find out what documentation they’re looking for to enable a successful switch.
In the UK, 18 business bank providers have the same set of documentation they need to set up a new account.
Contact your new bank
Then it’s a case of contacting your new bank and providing them with the relevant documentation. Agree any overdraft requirements you have before you make the switch.
As mentioned, you can choose your switching date – as long as you allow seven working days for the switch and that date isn’t on a weekend or bank holiday. You can continue to use your debit card up until your switching date. However, you shouldn’t set up any new direct debits or standing orders in the seven days leading up to the switch as they won’t be transferred across.
To start making the switch, ask your new bank to do so using the Current Account Switch Service. Before you do, you’ll need to agree to the Current Account Switch Agreement and the Current Account Closure Instruction. These are both provided by your new bank. The whole process will be handled by your new bank – they’ll let you know when the process starts and finishes. Don’t worry, any payments made to your old account by accident will be redirected to your new one for at least 36 months or longer if needed. Just remember to change your bank details on your invoices and other relevant documentation.
On the day of your switch, everything will be transferred over – this includes your current balance, standing order, direct debits and your payee details.
The Current Account Switch Guarantee means that if anything goes wrong with your switch, your new bank will take care of it.
If you want to see all your options easily in one place, you can easily compare business bank accounts with Nerdwallet now.