Which bank to use for your Small Business?


Dear Members

We all know the importance of keeping our business income separate to our personal income.

And one of the ways to do that when starting out is to have a separate bank account for your business transactions.

It not only helps keep your funds separate, but also gives a more professional image to your customers, to give out bank details in the name of your business instead of your personal name.

As a sole proprietor just starting your business and watching costs, one of your most annoying expenses can be your bank account.

I did a bit of digging around and found some very interesting things about opening a business bank account; I’m going to share them with you but please note, everything here is my own personal opinion and I am not by any means any type of banking expert.

Here are a few things I found out when looking around for a South African business bank account for UBC – that might help you:

 
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  1. You can open a transmission or savings business account in the name of your business, even if you are a sole proprietor; You don’t have to open a current/cheque account.
  2. Example for sole proprietors: if your name is Joe Smith and your business is Smith Garden Services, you can have a bank account in the name of Joe Smith t/a Smith Garden Services!  How cool is that!
  3. Transaction, transmission or savings type bank accounts seems to be the most cost effective option and doesn’t usually offer overdraft facilities, which in my opinion is GOOD.  I personally believe overdraft facilities are a TRAP, but I will discuss that in a different article.
  4. The biggest expenses you need to watch out for are:

    1. Monthly service fee – these seem to range from around R55 per month to over R500 per month for business start up accounts!
    2. Internet banking fee – I found out that it’s not always included in the Monthly Service Fee!!Some banks do include it and some don’t, so be sure to check that out.  I found out the fees for internet usage ranges from around R99 per month to over R150 per month.Paying a separate internet banking fee is a big no-no for me, when other banks include it in their Monthly Service Fee.
    3. EFT fees – they charge when you pay, not when you receive via EFT.  Prices range from around R5 to over R20 per EFR payment you make!
    4. Cash Deposit fees – this is a big expense no matter which bank you bank with, so check that our very carefully if your clients normally pay cash.
  5. Packaged deals – most banks offer a business start up package, e.g.  pay about R200 per month and it includes ABC.  Well, the ABC is what you need to check out and see whats useful to you and what’s missing that you would pay extra for.  For example, one bank offered a package that included the first 30 EFT payments no charge … but guess what, after that it cost R20 per EFT !  And internet banking was extra. So for someone who pays many affiliates, that would not be useful on the long term.
  6. Of course there are other fees to consider, but the above transactions seem to be those that small businesses use the most during a trading month. and they will all add up if you are not careful.
  7. Capitec seems to be the cheapest bank to use – but unfortunately, they don’t have a commercial banking license YET. Which is very sad, as their service and business hours are extremely competitive.
  8. Did you know that BIDVEST BANK offers a business bank account?  Apparently they recently received their commercial banking license. I found that out to my amazement this year, and wow, their business transaction account fees are extremely reasonable – at the time of writing this article, their monthly fees are around R50 per month and their EFT fees are around R5 each.  Internet is included!  Click Here to read about their business accounts.

Here is an article about SA Banks that makes for interesting reading:
https://mg.co.za/article/2017-10-13-00-new-kids-disrupt-sa-banking/#.WeSBZkcvJ1A.linkedin

I hope this article has given you some food for thought!

The moral of the story is that you can get a business account that does not cost an arm and a leg, but you have to do your homework.

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