Is my bank being too kind?

[Janeeb]

I approached my bank today regarding opening a business account for when I start online retailing. I explained that I was setting up as a sole trader, not giving up the 'day' job, didn't want a bank loan, I just wanted to keep a separate account for my business etc. I was offered an appointment with their business section but as an alternative, it was suggested I simply open a separate current account for the time being " to see how things go", with a view to moving to a business account later. I was told that a number of their customers do this and it is accepted as a short term solution.

I wasn't expecting such a relaxed approach (went prepped for a grilling!) so said I would come away and think about it. My first thought is that the account will have to be in my name, not the business name - could that cause problems? Should I just go for a business account? Help, please.....?

 

[lewisuk]

I think this is a fairly sensible idea, if it doesn't 'go anywhere' you won't have to worry about the bank charging you for running a business account (after a year or so free banking normally) and if you are using paypal etc it won't make any difference.
As you are a sole trader and not a limited company you have no real protection in business in terms of liability so there will be no difference between a business and personal account.
The only potential draw back is if you want to get merchant services for online trading further down the line, in this case having a history is normally required but you may have to be a company rather than a sole trader.
Hope this helps

 

[Calibre Designs]

How would your clients pay you? If some will pay by cheque, you'll want them to pay it to the name of the business and it looks more professional that way too. If this is the case, you will need a business account.

 

[stephendoyle]

im with calibre designs

to project a business image you need to be a business.

very very weird that a bank is more or less saying go on test
the water.

i would make sure that they open a business account for you.

stephen doyle

 

[Steve2507]

I agree with ccuk and calibre. Open a business account, rather than a current account. If the business takes off then you will have a "track record" with the bank for any loans, overdrafts, credit cards etc you may require in the future.

PS Speaking as an ex bank manager banks are never too kind, there is always a motive. It could have been that the branch was behind on their current account targets and getting you signed up as a current account customer would have helped. Then when you transfer to a business account in the future you would help another target.

 

[Fill-Your-World]

How are you planning on taking money online? As an online retailer you will need a business account if you plan on having a merchant account. Many banks offer a free period, Lloyds TSB offer 18 months free business banking for example.

 

[Janeeb]

Thanks to everyone for all your advice. As I will be mainly selling online it makes sense to go with my original idea of getting a business account - the general consensus confirms this should be the way to go. I just thought I was missing something when the bank suggested a separate current account to start with - threw me off track for a minute!

 

[CharlieWasAnAngel]

A friend and I did a little bit of freelance work a few years back, and decided that the best way forward would be to open a business bank account (I now think it was probably *not* the best way forward). But we got 18 months free on the business bank account....It was with Barclays, but I think a number of the big banks were doing it at the time.

 

[Gavin Harris]

I explained that I was setting up as a sole trader, not giving up the 'day' job, didn't want a bank loan, I just wanted to keep a separate account for my business etc. I was offered an appointment with their business section but as an alternative, it was suggested I simply open a separate current account for the time being " to see how things go", with a view to moving to a business account later.

Most banks will open a business account for you without any problems. It's only when you start asking for loans/overdrafts that they need more assurance about what you're doing. Having an account with no overdraft makes you a very small liability to them. Expect them to ask questions about your business - what it is you do and expected turnover etc, but it's all fairly simple.

HSBC and Lloyds TSB are offering an initial free banking period (around 18 months) for business accounts which should be enough to "test the water" with.

 

[gibby]

I get the feeling they arnt taking you too seriously.
I know alot of ppl seem to be opening business accounts but then never do anything with them. The bank may see this as a way to do less work.

On the other side it can be good for you if its a part time venture as it reduces costs etc.
An accountant told me to do this years ago to save money

the other alternative is to go for a free biz account or one that is free for online transactions, the co op do a good one.

G

 

[INDIZINE]

I agree with the target being the bank's excuse. The closing of, or failure to make money, on business accounts, will be targetted. Nothing sinister but just in their favour.

 

[Sue F]

I opened a business account with the HSBC and it was free for the first year. This year my account manager has moved me on to something else with out me having to do anything and my account number stayed the same. It basically means that I have stayed on the free banking tarif except there's a limit to how many cheques I can pay in over each month. I can't remember how many I'm allowed as my business is on line and in eighteen months I've only had two cheques so it's not an issue for me although it may be for you depending on your business.

I was actually surprised how easy it was to open a business account too but then my in laws have a business account at the same branch so I don't know if that made a difference.

I pay my invoices online and rarely have to go in to a branch.

Have a look around for other banks who offer your first year free which will give you the chance to see how your business is going to take off.

Best of luck.

 

[Janeeb]

I agree that I don't think they took me seriously and got the impression that they've probably had quite a few people set up business accounts which have not been used or haven't worked out. I don't suppose that reflects well.

I can get 18 months free business banking with them so might as well take advantage of that - and show them that I AM serious!

 

[gibby]

good for you - great attitude
remember to shop around to get a good account once the charges come in

G