Pick a winner
Banking and ﬁnance services have never been under so much scrutiny, but that doesn’t necessarily make an accountant’s task of choosing a bank any easier. Nick Huber undertakes some of the initial legwork by rounding up the current high street offerings.
You’re an accountant working in a small or medium-sized business. Your boss has asked you to ﬁnd a new business bank account. Who can you trust?
Britain’s biggest banks have struggled to repair their reputations since the 2008 ﬁnancial crisis. Last year, city watchdog the Financial Conduct Authority (FCA) criticised the Royal Bank of Scotland for its “mistreatment” of small business customers struggling after the banking crisis. Other banks have also been criticised for their treatment of small businesses.
Last August, MPs on the All Party Parliamentary Group on Fair Business Banking wrote to the chief executive of the FCA to request an investigation into “the complex, and often incestuous, relationships between ﬁnancial institutions, their numerous advisers and related professions, and the complex regulatory framework that is supposed to uphold the highest standards”.
Meanwhile, banks are facing increasing competition from “alternative ﬁnance” companies, which are continuing to grow in popularity. We’ve spoken to banks and advisers for tips on how SMEs can ﬁnd the right bank.
Banking on business: what the high street banks offer
Metro, which opened its ﬁrst UK bank branch in 2010, says that its accounts for small businesses are easy to open. No appointment is needed to create one. If a business’s balance stays above £5,000 for the whole month, there’s no monthly account maintenance fee.
Its stores are open seven days a week, 362 days a year. It oﬀers online and mobile banking, including a Metro banking app. For businesses with an annual turnover of more than £2m there’s a commercial current account. It includes a relationship manager for each business and advice on cash ﬂ ow.
Ian Walters, Metro Bank’s managing director of business banking, told Financial Accountant: "Time and time again, customers tell me about how they’ve been mistreated – whether through banks not listening, not taking the time to understand, or showing complete disinterest in them." Metro’s relationship manager and credit team will often visit customers, Walters adds.
Won the Best Business Current Account Provider in the 2018 Business Moneyfacts Awards.
Santander’s business account includes current accounts, savings accounts, card acceptance services, insurance and loans of up to £25,000. It pays annual cashback on the ﬁ rst £10,000 of a company’s annual credit turnover, as well as oﬀering online and mobile banking.
Barclays’s business account for start-ups includes free banking for 12 months and ‘expert advice’.
Its established business account has two options: a ‘mixed payments plan’ for businesses that use cash, cheques or a range of ways to make and receive payments; and an ‘e-payments plan’ for businesses that receive electronic payments and make payments mainly through online banking and debit cards.
It includes online and mobile banking, as well as telephone-based business advice. Last August, Barclays announced a UK partnership with MarketInvoice, an alternative ﬁnance company.
Barclays’s SME clients will be able to use MarketInvoice’s online ﬁnance service, which buys customers’ outstanding invoices for up to 90% of their value. Chris Forrest, managing director, co-head SME, Barclays Business Banking, told Financial Accountant that some of its clients had said they felt pressured into oﬀering longer payment terms to stay competitive.
"This ties up their cash ﬂ ow, preventing them from seizing growth opportunities," he added. His advice for UK SMEs looking for a business bank?
Forrest says they should consult with an adviser, whether an accountant or ﬁnancial adviser; talk to local businesses for recommendations; and check a league table from UK ﬁnancial regulators, ranking banks by their customer service.
RBS oﬀers four business accounts: startup (businesses that have been trading less than a year and with a turnover of less than £1m will receive two years’ free banking); a business account (for businesses that have been trading for more than one year, with a turnover of up to £2m); and a community account (for not-for-proﬁt organisations; they receive free banking if annual credit turnover is less than £100,000).
There’s also a commercial account for businesses with a turnover of more than £2m, which includes a ‘personalised service’ and relationship manager. Online banking, telephone banking and a mobile banking app are included in these accounts.
Lloyds oﬀers three business accounts: for businesses with turnover of £0-£3m (18 months’ free day-to-day business banking for new businesses, and support from UK-based business management team); £3m-£25m (relationship managers and support teams, specialist banking services and support for industries including manufacturing, healthcare and property); and £25m+ (includes risk management and international trade support).
As you’d expect, there’s online banking and a mobile app. "No other bank has increased its lending more to Britain’s SMEs," Paul Gordon, managing director, SME and mid corporates at Lloyds Bank commercial banking, tells Financial Accountant. "While others have drawn back we have increased our lending to SMEs by a third in the past eight years."
HSBC’s business accounts include one for start-ups (free banking for the ﬁrst 18 months) and for large businesses with a turnover of more than £2m (this includes a dedicated relationship manager, choice of two online banking services, and the ability to make credit card payments online). It also oﬀers internet, telephone and mobile banking.
THE CO-OPERATIVE BANK
The Co-op emphasises it’s ‘ethical’ banking policy. Its business accounts include Business Directplus (free banking for 18 months for new customers); an account exclusively for members of the Federation of Small Businesses; and an account for charities, co-operatives, credit unions and ‘community interest companies’.
A spokeswoman for the building society said that it doesn’t currently oﬀ er a business banking product but it is “looking to enter the market”.
Finding the right bank
Small businesses’ shopping list will usually include banks with terms of business that are easy to understand, that don’t change at short notice, and that oﬀ er ﬂexible overdraft terms.
SMEs’ banks should suggest ideas and provide complex services quickly, says Colin Wright, partner at UHY Hacker Young.
But this doesn’t always happen. Some smaller SMEs say that UK banks do not provide them with the relationships teams or ﬁnancial support they had from mainstream lenders, says Damian Webb, partner at RSM, an accounting ﬁrm.
Advisers also say that small businesses increasingly want banks that can ‘disrupt’ the market and provide good ‘non-banking’ services, such as safe and eﬃcient links to their cloud accounting systems, ﬁnancial management tools, and insights about their industry.
"The younger generation of SME owners is more likely to move to alternative ﬁnance companies," Wright says.
Since August, UK banks have been ranked by the quality of their customer service under new rules from the Competition and Markets Authority, the UK’s competition watchdog.
Handelsbanken had had the best customer service for business banking, followed by Metro Bank, Santander, Barclays and Lloyds Bank, according to a survey of UK small and medium-sized businesses published in August last year, on behalf of the CMA.
Banks must publish information on how likely people would be to recommend their bank – as well as its online and mobile banking, branch and overdraft services – to friends, relatives or other businesses.
The ranking – from a survey of thousands of personal and small business customers – must be prominently displayed in banks’ branches, on their websites and apps.
The aim is to make it easier for people to compare bank services and increase competition among banks. Go here to see the current rankings: bvabdrc.com/products/ business-bankingservice-quality
POULTRY FARM SPREADS WINGS WITH LLOYDS
A manufacturer of poultry farm equipment that’s designed to improve bird welfare will launch the UK’s first commercial poultry farm that’s open to the public, with finance and advice from Lloyds Bank.
Lloyds Bank Commercial Banking’s York-based agriculture team provided Vencomatic Group with an £8.1m finance package to buy the land and develop the commercial units.
Dr Leon Furlong, Vencomatic’s managing director, says that Lloyds Bank’s agriculture team played an important part in helping it develop the farm.
The Northern Poultry Campus in Helperby, North Yorkshire, will open in 2020. The campus will be in Sally Farms, a new 600-acre poultry farm, which will house up to 64,000 birds, with 80 acres of outdoor space for livestock to roam freely.
Nick Huber is a freelance journalist