Financial management may not be the most glamourous part of running a business, but it’s one of (if not the) most important, especially if you’re wanting to be successful.
While it’s not necessarily a requirement to set up a dedicated business bank account, it certainly can be incredibly helpful in terms of keeping things organised and in check.
Business bank accounts to consider include:
Not only is it a safe place to keep your company’s funds, it can also play a pivotal role in helping you build and maintain a professional credit history and creating opportunities for the future.
| Company | Monthly Fee | Other Requirements | Claim offer |
|---|---|---|---|
 | Trusted by more than 50,000 companies 3 Month Free Trial | 3 Month Free Trial and managed through an easy to use mobile app. | Get this deal |
 | 1 Month Free then £14.90 + VAT per month (or £149 per year) | 10 minute sign up, accounting functions and easy to use invoicing tools to get invoices paid faster | Get this deal |
How Does Business Credit Work?
Your business’s credit history is basically a record of how your company manages its finances and overall financial obligations. It reflects the business’s commitment to paying suppliers, handling debt and generally how responsibly you’re able to manage credit.
Credit histories ar used by banks, lenders and suppliers to make assessments on your business’s reliability and creditworthiness.
And, having a strong credit score and profile is really important. It’ll help open doors to favourable loans, potential partnerships and better payment terms with vendors, among other things. Conversely, a poor credit history can limit your opportunities dramatically.
Why Business Bank Accounts Are Important
Opening a business account isn’t only formality, it’s also a strategic move that can be hugely beneficial to your company.
Having a functional and operational business bank account helps you separate personal and professional finances, creating a clear boundary between the two.
Not only is this an important distinction for bookkeeping and tax purposes, but it’s also great for building your startup’s financial identity, which has a direct impact on it creditworthiness.
When you conduct all business transactions through your business bank account – rather than through a personal account or a combination of personal and business accounts – you’ll be able to create a clear and transparent financial trail that’ll demonstrate accountability and professionalism over time.
Essentially, it’s about creating a credit profile for your business that’s separate from your personal credit history.
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Establishing Credability
When you’re in the early stages of establishing a business, credibility is everything. A dedicated business bank account signals to outsiders, especially potential lenders and partners, that you’re serious about your professional venture.
Indeed, when banks or other financial institutions review loan applications, they’re looking out for evidence of a stable and well-managed financial setup. So, if all your company’s transactions are processed through a business account, it’s easier for lenders to properly and efficiently evaluate your startup’s performance and creditworthiness.
The other thing is that a business account provides an official record of your income and expenses which can be really helpful if and when you’re ready to apply for a loan.
Building Up Credit History
Building up credit history isn’t something that just happens overnight, it’s developed through consistent financial activity over a period of time.
This is partly why it’s recommended that you open a business bank account as soon as possible, even if it doesn’t feel necessary in the early stages of your company’s life.
By doing this, you an start creating a foundation for a strong credit history by means of having regular transactions, timely bill payments and responsible use of credit facilities linked to your business.
If you start the process early, it’ll be far easier for you to start the process of applying for a loan or lines of business credit, because you’re credit history and status will already be somewhat established.
Conversely, if you haven’t done anything in line with building strong credit, you may find yourself in a position in which you’re needing a loan or some other kind of financial assistance but aren’t ready to apply just yet, making the process take longer which isn’t ideal when you need money.
Avoiding the Challenges Associated with Professional Credit
As with any type of credit, using a business bank account to build your credit history can be a double-edged sword – there’s risk involved if you default in any way.
It’s essential that you avoid overdrafting your account, missing payments or defaulting in any other way. Always make sure your account is in good standing and that you’re always meeting financial obligations.
Also, be careful of relying too heavily on credit facilities that are linked to your business account. Occasional use of overdrafts or credit cards can help demonstrate responsible borrowing,, but if you’re doing it excessively, it may come across more like financial instability which could be harmful to your credit profile.
