When you start or run a family business, it is easy to overlook how much influence choosing the right bank for your business can have on daily operations and long-term growth. The right account can affect cashflow management, credit options and the quality of service you receive. At Hamilton Morris Waugh, a bank account is more than a place to hold funds – it is an important pillar in your business structure.

Whether your business is new or well-established, you may be uncertain which provider will meet your needs. Should you stick with a high-street institution, or are you better off considering one of the newer challenger banks? In this guide, we will examine the pros and cons of each option, with a focus on the factors that matter to small and medium-sized enterprises (SMEs).

Why choosing the right bank for your business matters

Choosing the right bank for your business plays a central role in how you handle finances. This includes daily transactions, access to loans or overdrafts and the systems you use for payments. For the 2024/25 tax year, corporation tax in the UK can be as high as 25% for companies with annual profits above £250,000 and down to 19% for those with profits of £50,000 or below. For sole traders and partnerships, the personal allowance remains at £12,570, with higher rates once income exceeds set limits.

These figures sound like pure tax details, but they can shape how much funding your business has to invest in products, staff or expansion. The right bank for your business can provide competitive interest rates, low transaction fees and easy budgeting tools can make a difference at each growth stage.

Many small businesses find that flexible, tech-based options can give them more efficient ways to manage daily finances. On the other hand, high-street banks remain popular among business owners who prefer face-to-face contact, branch-based services and well-established reputations.

Traditional high-street banks

High-street banks have been the mainstay for business accounts for decades. Names like Barclays, HSBC, NatWest and Lloyds are familiar to owners across the UK. Trust is a major factor for many family-run businesses. These banks have a long history, which can be reassuring if you want to feel certain about stability. Here are some key points to consider.

1. Branch network and in-person service
   Some business owners prefer to work with staff they can meet in person, especially when handling complex queries or discussing a loan application. High-street banks usually provide more branch locations, although branch closures have become more common in recent years. You may value this face-to-face option if you need to deposit cheques or cash regularly.
2. Credit and loan facilities
   Traditional banks typically have established lending structures. They can offer secured loans, overdrafts, and business credit cards, though their approval processes can be more thorough and take longer than those of challenger banks. Still, a positive relationship with a high-street bank can lead to favourable credit terms.
3. Monthly fees and transaction costs
   High-street banks often charge monthly account fees ranging from around £5 to £10, plus transaction costs for deposits and withdrawals. If your business makes many monthly transactions, these fees can add up. Some banks may waive fees for an initial period, which can be helpful if you are just starting out.
4. Online banking platforms
   While high-street providers have digital services, users sometimes find them less user-friendly than those of challenger banks. However, many banks are investing in app improvements to remain competitive.

Challenger banks

Names such as Monzo, Revolut, and Starling have made their mark over the past few years by offering digital-first services. These companies often focus on technology to help business owners manage money on the go. Here are some potential advantages and drawbacks.

1. Streamlined applications
   Challenger banks typically offer a quick online application process. You can open an account in minutes without the need to visit a branch. This speed can be helpful if you are in the early stages of establishing a business and want to minimise admin time.
2. Integration with accounting software
   Monzo, Starling, and Revolut, among others, often integrate seamlessly with platforms like Xero or QuickBooks. These integrations help automate tasks such as expense categorisation, which can reduce manual data entry. This can be particularly helpful for small businesses looking to stay on top of records, especially as they monitor tax thresholds.
3. Cost structure
   Some challenger banks offer free business accounts, though you may have to pay for additional features. Others charge a fixed monthly fee that often includes a certain number of free transactions. You should compare the fees of any bank against your typical payment volumes to see what works best for you.
4. Limited physical presence
   If you depend on in-person banking, working with a digital-only institution might be challenging. Deposit options for cheques or cash are often limited to third-party services or local Post Office deposits, and there is no branch network for face-to-face advice.
5. Growing credibility
   Many challenger banks are regulated in the UK, so your funds are protected up to £85,000 under the Financial Services Compensation Scheme (FSCS), just like high-street banks. Those which are not generally operated under e-money licences rather than full banking licences (for example, certain fintech apps). FSCS does not cover these banks but instead safeguard funds differently (for example, keeping client money in segregated accounts). Many business owners now trust these newer providers, though some still value the established reputation of a high-street bank.

Factors to consider when choosing the right bank for your business

Deciding which type of bank suits your business is easier if you list your requirements. Here are some questions to ask.

• Do you need regular face-to-face contact?
  A high-street bank might be more convenient if you deposit cash or cheques often. A challenger bank could be a better fit if your transactions are mostly online.
• What are the fees and transaction limits?
  Compare monthly fees, transaction costs, foreign exchange charges, and other relevant costs. Make sure to weigh these against the typical activity in your account.
• Do you use multiple currencies or pay overseas suppliers?
  Some challenger banks offer better exchange rates than high-street providers. This can lower costs if you have international clients or suppliers.
• How important is integration with accounting software?
  You may prefer a platform that automatically syncs with your software to reduce bookkeeping tasks. As an accountancy firm, this saves time and reduces errors.
• What about credit or loans?
  If you plan to borrow funds, compare high-street and challenger banks’ interest rates and approval criteria. Traditional banks may require more paperwork but offer larger lending facilities. Challenger banks might be faster in approving smaller lines of credit.
• Are you comfortable with digital apps?
  If you prefer a traditional approach, you might not find a purely app-based service appealing. On the other hand, if you like to manage everything from your smartphone, a challenger bank is more convenient.

How we can help you choose the right bank for your business

We work with clients across Northern Ireland who run family businesses in various sectors. We know that every enterprise has its own financial requirements. Our team at Hamilton Morris Waugh can help you compare providers, create cashflow forecasts, and advise you on software integrations. We can also guide you on how your choice of bank and banking services can affect your tax position, especially if you need clarity on corporation tax, personal allowances or other tax thresholds.

Choosing the right bank could help you streamline your accounts, reduce fees and stay better prepared for growth challenges. Whether you decide on a traditional high-street option or a challenger bank, thoroughly explore their offerings. With the right support, you will find an option that aligns with your day-to-day operations and your plans for the future.

If you want to discuss any points raised in this guide, you can reach us by phone or through our website. We are always ready to have a relaxed conversation about your plans and explain how we can help you make the best decisions for your family business.

Need help choosing the right bank for your business? Get in touch with us to talk to our experts