Small businesses shun business bank accounts

An interesting news piece for anyone teaching the sources of finance for start-ups and small businesses. It seems that the business accounts of the big high street banks just don’t compete with the retail (consumer) sector when it comes to savings rates and other services.

Comparison website moneysupermarket.com have reported today that 1.2m entrepreneurs running SMEs in the UK do not have a business account, suggesting they are thinking like consumers and using their individual account to manage company finances.

Researchers said it is likely entrepreneurs are tempted into such actions because of the wide gulf that exists between the best business and retail deals. While Alliance & Leicester, for example, offers 5.73% interest on business balances of up to £999, retail customers can enjoy 8.5%on balances of up to £2,500.

Similarly, Abbey’s retail clients can receive 8% on £2,500 balances whereas business customers are offered just 0.25% on balances up to £4,999.

An interesting line at the end of their press release:

“The majority of sole-traders and business partners act and think like consumers and with the threat of fee based banking coming into the retail sector, we could see a seismic change and the whole market merging into one.”