If you run a start-up or a small to medium enterprise (SME), opening a business current account is key. These work in exactly the same way as a personal bank account, but offer an effective method of keeping your business and personal affairs separate, simplifying administration and making it easier to manage cash flow.

Like a standard bank account, a business account holder can withdraw money without notice and make day-to-day banking transactions, such as paying money in, withdrawing cash from an ATM with a debit card, paying bills by check and setting up standing orders and direct debits to cover recurring costs.

Business accounts on offer range from a basic account with a debit card and check book to an account with a host of business advantages such as a relationship manager, overdraft facilities and lifestyle privileges – or even an international trading account to help manage your import and export needs.

What to look for in an SME current account

The first factor to consider is what you want from the account. For a start-up, a basic account that can track cash flow may be enough.

For a more established SME, added extras that come with the account, such as free account transactions, free internet banking, overdraft facilities and interest on in-credit balances may be important because they aid the company’s cash flow.

[ Compare SME accounts | Compare SME credit cards | Compare SME business finance | Compare SME equipment finance ]

Features to look for:

  • Minimum monthly balance to be maintained: How much access an SME has to these features can depend on the minimum monthly balance the company can maintain in the account over the course of a month. This amount can vary depending on the service provider and the type of account you choose. However, as a general rule of thumb, the higher the minimum monthly balance, the more perks the bank will offer the business owner in return.
  • Multiple currencies: For those making regular international transactions, you may want to find an account with multi-currency flexibility.
  • Relationship manager: And, for the more demanding founder or CEO, with more intricate financial needs, a dedicated personal relationship manager may be vital to the smooth running of the enterprise’s financial affairs.
  • Credit card or privileges: Also, ask what cards does the account come with? While a debit card may be standard, access to an SME credit card will help the business negotiate better discounts from suppliers as you would then not need a credit period from a supplier.  And are there any lifestyle benefits with the account or debit card such as travel insurance, airport lounge access, discounts at restaurants and so on?
  • Trade and remittance rates: If you are trading internationally as well as locally, look for an account that offers both trade and transactional solutions. This is important, as a good trade account will offer preferential trade and remittance rates to help ward against international transfers and Forex conversion fees.
  • Import-export products: It should also offer access to import and export related products to meet your foreign trade needs. These includes the issuance of letters of guarantee when you are participating in a bid, acting as a third party document handling entity for collections and issuing Letters of Credit to facilitate the payment and shipment of goods.

Whatever account a business signs up for, it is wise to research the bank’s other personal finance products that are tailored to SMEs. If you’re going through a growth phase, for example, or anticipate a future expansion, opening a current account with a bank that offers business loans with preferential interest rates is a sensible move.

[ Related: A guide to credit cards for SMEs | A guide to SME loans | Guide to SME Islamic Finance ]

What to be wary of

  • Fees: Current accounts can come with a whole host of fees, whether monthly management charges or fees for issuing new check books, making transfers or paying wages. These can quickly add up, so look for accounts that have low fees on the transactions you will make the most. Can the bank help with paying wages, for example? Otherwise it’s an AED 25 fee per employee every month. Similarly, trade accounts come with a host of fees, from document-handling charges to administrative fees and issuance commission, so find the account that works best for your needs.
  • Not planning ahead: It can a mistake to choose a bank with the lowest fees without considering the future; it can be hard to switch banks at a later stage if you find a financial institution offering better loan rates, that also demands you transfer your salary to that bank. SME owners in the e-commerce sector also need to consider whether the bank can act as the merchant when the business is fully operational.
  • Overdraft dangers: While a business account can come with an overdraft facility, such facilities often come with steep fees. These fees are even higher if you are unauthorized by your bank when you go into the red and beyond the balance or overdraft limit.
  • Ease of making transactions: Online banking is not necessarily free for business customers and international transactions can be costly. There may be a limited number of free international remittances to clients/customers based abroad, for example, something that could affect your ability to run the business efficiently.
  • Minimum monthly expectations: For any SME, cash flow can be an issue. This could affect your ability to meet your average minimum monthly balance. Failure to stick to the agreed rate will incur charges. Similarly a  trade and transactional account will demand minimum monthly trade throughput volumes so failure to meet those will also incur fees.