Member Article

How sustainable is your relationship with your bank?

Chartered accountancy practice Tait Walker have launched a business advice blog for business owners and managers in the North East, available at www.businessadvicene.com. As a taste of forthcoming articles that will be featured via the blog, Tait Walker’s Matthew Higgins tells us why your exit must be planned at your entrance to business.

There used to be a day when you chose a bank and stuck with them forever, but nowadays a bank has to be there for every step of your journey, and that might mean switching at different points in your business life.

It seems like every time you turn around today you see a newly refurbished branch, or banks who claim that they operate differently whether that is a step back to the “good old days” where you could pick up the phone and talk to a banker you knew, or by embracing new technology to provide an automated service to maximise your convenience.

Whichever approach appeals to you, in today’s climate of “instant information”, there is no shortage of ways to compare one bank with another. But why would you want to go through the hassle of changing banks in the first place?

Well, maybe you have seen a loan at a better rate of interest at another bank, maybe they offer services for new businesses, or free transactions for new clients, or maybe you are just fed up with your current bank and want a change. Almost all UK banks stress how small business-friendly their accounts are, but whatever your motivation, it will pay you to do some research before you make the switch; savings here and obtaining the right level of support will aid your company in the long-run.

Be sure to compare like with like, and ensure that your proposed new bank will address the issues that led to your existing frustrations. For example, if you struggle with how long it takes to clear a cheque, or the internet banking of your current bankers, it’s best to check out whether your new provider will do any better. It is also worth considering whether independent providers of working capital may be the solution to your funding needs but when considering a change of banks, we would recommend the following:

- What overdraft limits will be set on your account?

- How will you be charged for going into the red? Do you understand the basis of these charges, and are they appropriate for your anticipated usage of the account?

- Have you read the small print?

- How much do transactions cost, and how long does any introductory offer last?

- Is the local branch close to and convenient for your business? Are the opening times suitable?

- What services does the branch that you will be using offer in situ?

- If you are in a remote location, what agreements does your new bank have with other banks and Post Offices? You may be able to pay bills and withdraw and deposit cash without actually entering your own bank.

- What schemes and agreements does the bank sign up to? For example, the Enterprise Finance Guarantee (EFG) is a loan guarantee scheme intended to facilitate additional bank lending to viable Small and Medium sized businesses with insufficient or no security with which to secure a normal commercial loan. It is available to businesses in most business sectors.

It is worth your time to review your current banking arrangements to see if a better option exists. Whilst not encouraging any business to move purely for the sake of it, similarly, don’t let inertia get in the way.

Visit www.businessadvicene.com to find out more.

This was posted in Bdaily's Members' News section by Kirsty Ramsey .