Originally written by James Trowell on Small Business
Q: Should I use a personal bank account for my small business?
A: The short answer is no – but you’re not alone if you do. We conducted a survey earlier this year and found that 63pc of sole traders are using a personal account to pay for everything. Business, pleasure, household bills and everything else in between.
This might feel like an easy option for the busy, fast-paced life of a small business owner, but it doesn’t serve you or your business very well. One bank statement. One never-ending list of transactions. It’s likely to create a financially unstable solution to managing your money because you’ll never really know where you stand.
It’s a little different if you’re operating as a limited company. While it’s not strictly a legal requirement to have a dedicated business account it’s strongly advised. As your limited company is a separate legal entity, technically its money doesn’t belong to you and so needs to be separated from your own finances.
Here are some reasons why keeping your business and personal finances separate is a good idea:
Save time and money when it comes to your tax return
If you’re self-employed you can claim
Tag Archive for Small-business Banking
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One in five small businesses fell into their overdrafts last year
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
Almost one in five small businesses have struggled with no cash in the bank, according to new research by Fluidly. The survey of 19,799 companies found that those having to use their overdrafts rose from 13.9pc in March 2019 to 17.8pc in January 2020.
Late payments, Brexit and economic uncertainty appear to be taking their toll as many businesses went into their overdrafts in nine of the 11 months tracked.
Plymouth was the worst-hit region at 35.7pc, followed by Southampton (34.3pc) and Peterborough, where around a third of businesses (32.8pc) have had to resort to their overdraft to survive.
RegionCompanies in overdraft at the end of the month (pc)
Plymouth35.7pc
Southampton34.3pc
Peterborough32.8pc
Shrewsbury31.1pc
Preston29.7pc
Stoke-on-Trent27.4pc
Manchester26.5pc
Bristol26.4pc
Milton Keynes26.1pc
York26pc
>See also: What are the best alternatives to a business overdraft?
Food and drink makers (34.7pc), product manufacturers (33.3pc) and farmers (32.6pc) have fared the worst over that 11-month period. This suggests that sectors investing large amounts upfront are suffering more.
IndustryCompanies in overdraft at end of month by industry (pc)
Food and drink manufacturers34.7pc
Product manufacturers33.3pc
Farmers (agriculture)32.6pc
Post and telecommunications31.7pc
Motor sales and repair31.3pc
Retail and trade30.8pc
Land transport30.4pc
Hotels and restaurants30pc
Construction29.5pc
Travel agents29pc
Last month, research from the Federation of Small Businesses (FSB) found that a growing proportion of finance applications (37pc) were being driven by
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Small businesses using loans to manage cashflow, instead of investing
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Small businesses are mostly taking out loans to manage their cashflow rather than investing in their companies, according to research.
Almost 40 per cent of small businesses that borrowed money in the last quarter of 2019 used cash to keep going rather than invest in their firms, says the Federation of Small Businesses.
This compared with 23 per cent using finance to update equipment, 16 per cent to expand their business or just 2 per cent for hiring staff.
>See also: Small businesses spend hour and a half each day chasing late payments
That small business is using external finance to cover outstanding invoices highlights the late payment crisis, says the FSB. The latest figures from Pay.UK show that the balance of outstanding late payments almost doubled to £23bn in 2019.
And applications for external finance dropped off in Q4 as the share of firms describing credit as “unaffordable” rose, despite more being offered at sub 4 per cent lending rates.
Mike Cherry, national chairman of FSB, said: “It’s troubling that so many external finance applications are driven by cashflow concerns. You wouldn’t dream of doing your weekly shop and telling the cashier that you’ll pay for it in
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12 of the best digital banking platforms for small business
by Anna Jordan • • 0 Comments
Originally written by Anna Jordan on Small Business
Digital banking platforms, also known as Authorised Payment Institutions (API) or e-money institutions/issuers, generally don’t consider themselves to be banks, but they promise something different to their traditional competitors.
These platforms all offer an alternative to traditional high street accounts, they are quick to set up and operate entirely from your smartphone where you can access all their digital banking services.
According to Finder, one in ten people in the UK have switched to a digital only bank like Monzo, Revolut or Starling for their personal banking. That said, nearly half (47pc) of those who use them keep less than £1,000 in a digital bank. There is hope for these challengers – two-thirds of respondents said they plan to convert fully to a digital bank in the future.
What’s interesting is that rather than holding onto cash, people often use personal mobile banking for secondary functions like spending abroad, transferring cash and budgeting apps.
Even if you’d like to keep the bulk of your cash with one of the traditional banks, having a digital account could see you well in one of these other key business areas.
Take a look at the digital banking platforms below and see
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Cashplus plans to lend £400m to small business from next year
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
EXCLUSIVE: Cashplus, one of Britain’s longest-established digital challenger banks, plans to lend £400m to small businesses over five years.
The fintech plans to have a 10pc market share of all new UK business accounts by 2024, compared with the 7pc share it already has today.
Cashplus applied to become a full-blown bank last year and expects to be authorized in Q1 2020 with the aim of becoming the specialist bank for small business. It already has around 75,000 business accounts.
>See also: Co-operative Bank to revolutionise small business banking offer
Unusually for a challenger bank, Cashplus has been in profit for the past eight years. In 2018-19 it generated £46.5m in turnover – a year-on-year increase of 19pc.
Should its banking licence be approved, Cashplus will fund its SME lending through the £500m of deposits it has built up since its launch in 2005.
Rich Wagner, chief executive of Cashplus, said: “The day we become a bank we will be able to unlock £400m of money and be able to lend that out to overlooked SMEs, which will almost supercharge our growth.”
Today, Cashplus has 250,00 customers, of which nearly one third are startups and entrepreneurs.
Since launch, Cashplus has expanded
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Co-operative Bank to revolutionise small business banking offer
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
EXCLUSIVE: The Co-operative Bank plans to expand its Co-op small business banking offer over the next year following its £15m grant funded by RBS.
Last month, the Co-op announced that increased its lending to small business customers for the first time in six years as it seeks to cast off its past problems.
The bank is matching the £15m Banking Competition Remedies grant with £17m of its own money.
See also: Nationwide wins £50m prize to help boost small business banking
The bank is the UK’s seventh biggest provider of loans to small businesses but put the brakes on lending in 2013 after discovering a £1.5bn hole in its finances that threatened its survival.
Donald Kerr, managing director of SME banking, told Small Business that the bank will:
Put a small-business focused relationship manager back into branches
Introduce same-day business bank account opening next year
Modernise its online banking platform, making it much easier for SMEs to integrate online accounting packages
Launch a mobile app for business customers next year
Introduce its own-brand accountancy package in partnership with a Manchester-based fintech
Offer a three-month cash flow facility based on transaction history
This is in addition to offering 30 months’ free banking to new customers in
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Government mulls small business funds to limit impact of no-deal Brexit
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
The Government is mulling setting up funds to ensure that small and medium-sized businesses have enough access to credit to weather a no-deal Brexit.
Business secretary Andrea Leadsom; Michael Gove, the minister in charge of no-deal preparations; and City minister John Glen are expected to meet senior bankers in Westminster on Thursday to discuss limiting the impact of a hard Brexit on small businesses, according to the Financial Times.
Read: 70% of businesses put investment on hold because of Brexit uncertainty
The Government is concerned about banks cutting lending to small business after the UK is due to leave the EU on October 31, according to one person briefed on the meeting agenda.
However, lenders are pushing for the Government to support companies that might be excluded from access to loans under banks’ standard risk criteria. They want the Government to extend the Enterprise Finance Guarantee on loans to businesses that do not have enough collateral to meet lenders’ normal requirements.
The Enterprise Finance Guarantee provides lenders with a Government-backed guarantee for up to 75pc of the outstanding balance of eligible facilities, potentially enabling a “no” credit decision from a lender to become a “yes”. It supports facilities
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Business challenges for UK small to medium sized companies
by Stephanie Spicer • • 0 Comments
Originally written by Stephanie Spicer on Small Business
Of all the business challenges facing small to medium sized businesses (SMEs) in the UK the looming economic impact of Brexit is the biggest concern they have at the moment. 30% of SMEs list this as their biggest worry with 19% then concerned about the potential for their operating costs to increase. This according to research from The Co-operative Bank.
SMEs were asked to consider their biggest concerns as regards business challenges across a range of business issues. Concerns over rising supplier costs was high up the list and as the table shows competition, red tape and regulation, knowing how to grow their business, late payments and staff issues were also key worries.
10 biggest concerns of SMEsPercentage of SMEs
Impact of Brexit upon the economy30%
Increase in operating costs19%
Competition17%
Red tape/regulation 14%
Increasing supplier costs14%
How to take my business to the next stage in its journey13%
Changing customer behaviour13%
Late payments13%
Access to funding11%
Recruitment/retaining talent10%
Donald Kerr, managing director of SME banking at The Co-operative Bank said: “It’s understandable that SMEs are concerned about the potential for rising costs, particularly when there remains so much uncertainty about the impact that an exit from European Union will have. Small businesses can prepare to adapt
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Four fintechs share £40m funding pot to boost small business finance
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
Four fintechs have been awarded £40m between them to address the £10bn funding gap caused by the lack of small business finance.
The £40m is part of a £775m programme funded by Royal Bank of Scotland as a condition of its bailout during the financial crisis.
A total of £425m will be given in cash grants to rival business banks and financial technology companies to support small businesses.
Previous recipients include Nationwide, Investec and the Co-Operative Bank.
Read: Best small business loans in the UK
Iwoca
Iwoca has been awarded £10m in funding, pledging to make £5bn available to small businesses by 2023.
The lender has pledged an additional £13m on top of the £10m grant to help open an office outside of London with at least 50 staff.
The £10m grant will expand Iwoca’s SME customer base to 150,000.
Since Iwoca launched in 2012, the small business lender has already funded 35,000 businesses in the UK, raised £350m in equity and debt finance.
Iwoca will make finance more accessible through the introduction of OpenLending, a customisable self-serve “plug & play” platform for a growing number of SME fintech partners involved in small business finance.
And Iwoca has partnered with Xero, the online accounting
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Exclusive – B-North to open national small business bank by end-2020
by Timothy Adler • • 0 Comments
Originally written by Timothy Adler on Small Business
B-North plans to open a national network of small business-only bank branches across England by the end of 2020.
The start-up bank, which has raised £4.5m in seed funding so far, plans to offer small business loans of anything between £500,000 up to £5m when it opens its doors.
Manchester will be the first B-North branch (or “lending pod”) to open next door, followed by branches opening in Yorkshire, the Midlands and London in stage one. B-North has identified another four locations for stage two.
Founders of the bank – which is currently in the process of applying for a banking licence – believe there is a gap in the market for an SME lender offering loans higher than the almost-instant debt offered by fintechs and peer-to-peer lenders, while offering faster lending decisions than incumbent high-street banks.
Spotcap, for example, offers loans of up to £250,000 to small businesses, priding itself on one-day decisions, while rival Esme offers fully automated SME loans of up to £150,000.
Currently, with traditional banks, requests for loans have to be passed upward to head office and can take between three and four months to be rubber stamped.
B-North’s highly localised model will allow