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How To Open A Business Bank Account

Aug 21, 2008
When opening a business account with a bank there is a large amount of documentation that is essential in order for the account to be opened. Naturally you must give the bank a clear idea of what the business is, and what it intends to do. Additionally most bank managers will want to see details of where the start up finances came from; whether it is your personal capital, or funding from a group of investors. The reason these are needed by the bank is because in order to support your business, they need information on how development will occur, and the security of your start up capital.

As part of the bank recognising your goals and objectives it is likely that the account manager will want to see a detailed business plan. This plan is a simple enough document to put together and should include information on the operations, the long and short term objectives of the business and what types of strategies will be utilised in order to achieve these goals. In addition, most business plans should include detailed financial forecasts, usually based on the estimated income over the next three to five years. The bank will normally use this information to assess whether the goals are realistic and to evaluate the level of success in the coming years.

As well as the business plan, the representative will want to see a number of other documents in order for you to open a business account. The first of these documents cover identification, such as passports or driving licences for yourself and any other partners; the bank needs to see these to prevent any illegal money laundering operations. For limited companies, a Certificate of Incorporation will be required although sole traders will need no such certification. As well as these two key elements a credit history and a list of signatories will also have to be presented before an account can be opened.

When selecting an account it is important to remember bank charges. Obviously details of bank charging policy will be available in the accompanying literature; this is information worth reading and understanding fully. The majority of charges are compiled in a monthly or quarterly format although some charges, for instance those relating to transactions can be based upon a pro rata basis.

Many business owners find it difficult to get down to the bank during office hours due to the restrictions of owning and running a business. Fortunately the majority of banks now have internet and phone banking options meaning that finances are either a click or phone call away at any point during the day or night. Many will also want to utilise services such as direct debit that allow customers to make payments automatically, meaning that bills and rent are never forgotten and hence no financial penalties are levied.

Naturally opening a business account for many is a daunting and difficult task. Unfortunately it is an essential part of starting a company. Having a specialist account, even as a sole trader can make tax returns and accounting functions that much easier. Also, a bank can provide great levels of support in terms of advice and hence these services should be utilised extensively. A final tip is to always build a good rapport with the bank's representatives, by keeping them on side as well as giving them a clear idea of your goals and objectives it is possible to create a solid financial base for a company.
About the Author
Financial expert Thomas Pretty looks into the key considerations that should be made when opening a business bank account and the processes involved.
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