What are the best UK digital banks for small businesses? 

Digital banking offers a secure, fast and efficient service, and round the clock account access and management. Providers of digital bank accounts have lower overheads than traditional banks as they don’t have branches to maintain. This means that fees can be lower and interest rates can be higher than those offered on the high street.

There are increasing numbers of digital banks, but which of these ‘challengers’ offer the best options for small businesses? All claim quick to open accounts and ease of use, but other details differ. Here we look at some of the choices available.

Tide

Offering only business banking since 2015, Tide indicates that it is trusted by over 130,000 UK businesses already. As of June 2019, it claims to have 1.5% of the market share. 

It offers three types of account progressing from the free Tide Standard through to its Plus and Premium offerings which come with monthly fees. 

For those looking for a bank account without fees, the standard account offers free card payments and team cards as well as instant invoicing. However, bank transfers, cash deposits and cash withdrawals do incur a fee.

Monese

Monese does not have a free offering, but its business account is available for £9.95 a month and comes packaged with the Plus personal account. Potentially an attractive option with those doing business across borders, its banking app caters to over 800,000 customers in 30 countries. 

It offers free local payments, low-cost international transfers, a contactless Mastercard business card, accessibility in ten languages and the option to deposit cash at over 40,000 locations throughout the UK.

Coconut

Coconut bills itself as the financial companion for self-employed people. Offering more than just the standard banking functionality, it also includes expenses and invoicing. Additional functionality allows you to connect your current accounts and credit cards to enable an overall view of your finances in one place.

For smaller businesses, the Start option may be sufficient and has no fees. It includes a free UK account, expense tracking and a tax tool for sole traders. However, invoices are limited to 3 a month. The Grow account at £5 a month gives unlimited invoices and free foreign currency exchange. 

N26

N26 offers a free bank account for the self-employed and freelancers which includes worldwide free card payments, making it an attractive option if your business includes significant time overseas. The account also generates 0.1% cashback on all purchases made.

Support is available in 5 languages, and while they operate via a mobile app in common with other digital banking services providers, they also offer the option to export and download lists of your transactions for printing or spreadsheet analysis.

Holvi

The Holvi business account is another which offers expenses functionality. They also state that their account tracks both your income and expenses automatically, helping you to keep up-to-date easily. Performing some of the basic functionality of accounting packages, the app automatically categorises and records transactions and allows camera upload of expense receipts.

For no monthly subscription, you get one business account and an associated Mastercard together with unlimited bank transfers, (subject to a fair use policy), and unlimited account users. The Grower account, for which a fee of £5 a month is payable, also includes digital invoicing.

Starling

Perhaps one of the best-known offerings, Starling does not charge for organisations that have less than ten employees and turn over less than £1.7 million a year. Even larger organisations can benefit from fee-free business banking for a limited period.

Starling also connects to several popular accounting software packages meaning that transactions can be imported instead of needing to be manually loaded. They also offer expenses automation, the ability to deposit cash at local Post Offices and a flexible overdraft.

Monzo

Not yet available, but eagerly anticipated, is the Monzo business bank account offering. Already a major player in the app-based digital banking market, it has been trialling its business offering for a while.

Promising connections with accountancy tools, strong customer support and the ability to segregate money into different pots for forward planning, it says it will offer all the standard basics expected too. Although pricing isn’t yet known, it has criticised others in the market previously for confusing fees.

The best digital account for your business will depend on your particular organisational requirements. The free offerings may be sufficient for the freelancer or very small business. However, slightly larger or more complex businesses may find the free options limited or that the transaction fees add up if cash deposits and withdrawals are required regularly. 

Features such as integration with accounting software, the ability to invoice and automation of expenses all save time and reduce accounting errors and could be the deciding factor. Equally, if your business involves travel, then accounts offering low or zero fee foreign exchange and transactions could prove most attractive.

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