Small Business Banking

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AKA 9Fingers
19 Jan 2013
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Southampton area
Anyone using one of the Challenger Banks to provide small business banking and care to share experiences?

I set up in Aug 18 with a high street bank and am coming to the end of my free 18 months and will have to pay £90 per year. This is for 3-4 transactions per month and no overdraft etc.

I'm looking at TIDE bank who charge 20p per bank to bank transactions and debit card payments are free. Everything is done either with a phone app or a web browser interface. All seems to be good and they have been very responsive to answering my questions.

So should I jump the high street ship?
I would say think carefully. I have been on the board of an investment bank and like it or not operating bank accounts is not free and in the days of near zero interest rates retail banks lose money on small business current accounts, due to the onerous regulatory rules on daily reconciliations etc.

The challenger banks are very motivated to add customers in order to drive up their client count and so will do very cheap deals. This may suit you but there are downsides that you need to be careful of. As a business customer you do not have FSCS protection for your money if the bank fails. Challenger banks are usually very thinly capitalised and easily get into trouble. This happened to Metro bank recently and they are still struggling. Never keep much money in such a bank.

Secondly, if you wish to borrow as a small business, challenger banks are usually hopeless. They extract high levels of security and high interest rates and high set up fees.

Thirdly, businesses develop a credit score. There are three major credit agencies in this country and two of them are rather expensive (they charge the banks, as do the automatic anti-money laundering and ID checking agencies). Hence many smaller banks use cheaper alternatives. This gives no track record with the bigger raters, and may affect your credit rating as a business. Incidentally, this can also apply to personal banking and affect the ability to obtain mortgages etc.

Many banks (irrespective of size) are struggling with updating IT systems. The regulatory burden here is quite high too (for example daily requirement for investment transaction reporting to regulator, with over 70 data collection fields). Continual updates can result in systems disruption and has led me very much to the conclusion that in my private businesses and private life I do not wish to be dependent on one bank.

I have banked with every high street bank and in business have dabbled with a few challengers, including Metro. It does no harm to test one out, but do that before you jump ship. As with everything, you tend to get what you pay for. £1.73 a week for bank security and service is not expensive really.
Thanks for your reply,
I am indeed running a Tide account in parallel with my high street account for now. I realise that one does not realise the importance of security until a problem arises but I have been underwhelmed by the nature and speed of response from Santander - usually waiting a day or so for a reply that either says in essence "ask someone else" or " we don't support this function".

The speed of account set up with Tide has been amazing. from name address and company name, they looked up instantly at companies house to get details of the major shareholder and ask for DOB confirmation. A bit of ping pong texts and emails to verify codes etc and in 10 mins I had account no and sort code.
Compare that to Santander with wait a week for an appointment in branch, then 2 hours in branch mainly on a phone line to their business centre, then several days to get account no... Well there is no comparison. Chalk & cheese.
Join up with the fsb and just one of the benefits is free on line banking with the Cooperative bank. So far been prefect for me.
Forgot to say I also get 25 squid annual gift for the privilege.
Even without FSB membership, (£177 pa, I read) I see Coop offer 30 months free business banking which is not bad.
I might look deeper if Tide trial does not work out.

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