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Cut your bank costs

Top money-saving tips on finding the best deal

There's nothing that preoccupies hard-pressed small business owners more than their finances. Raising capital, getting funds in, keeping costs down and holding their fingers in the cash dyke when business dips, can be a full-time occupation.

Small businesses, though, can take a lot of the angst out of their accounting by making sure they get the best deal out of their banks. Here's some cash saving thoughts...

Control of your finances starts with your business bank account. Competition has never been so fierce in the banking sector so there are plenty of deals to be found for start-up and small businesses.

Banks will negotiate loans at discounted rates in the early life of a business and many banks now offer free and discounted banking for start up businesses for anything up to three years (or in the case of Bank of Scotland forever if you maintain a minimum balance of �5,000 and issue 100 cheques or less per month).

However, make sure your bank spells out exactly what "free banking" really means. Caveats may include such requirements as remaining in credit, a cap on the number of transactions and a maximum turnover for the year. There are some useful advice pages for small businesses on the British Bankers Association website including a helpful Business Account Finder. This lists the various introductory offers available to new businesses and has a nifty interactive bank comparison feature which lets you compare the tariffs, charges and rates different banks levy for different types of business (e.g. sole trader, partnership etc). You can also find updated business bank account tariffs at Business Money.

The top four clearing banks hold some 80% of small business bank accounts, but nowadays it pays to shop around. You may have used a High Street bank for a start-up loan, but if your circumstances have changed and you no longer need finance, you might be better off with one of the many alternative banks. Smaller banks not only offer free banking deals, they often pay interest on business current accounts.

If you are wary of moving all your banking to an untried, smaller bank, you can always use your non-High Street cheque account for larger transactions. This will help reduce costs if your High Street bank charges on the basis of account turnover. For more information on alternative banks and their offerings try the British Bankers Association site and the monthly magazine Business Moneyfacts (01603 476476).

Review the cost of your bank charges at least once a year. Are they going up or down? It might pay to re-negotiate or even move the account if charges have become uncompetitive. Many small businesses haven't a clue how much they are being charged. Also, banks make mistakes and companies can recoup overcharges. If one interest period of bank charges seems out of kilter, ask the bank to check it. Usually banks will pay up if their calculations are shown to be wrong - some more quickly than others.

Banks are beginning to tailor financing deals to the needs of smaller businesses. One of the most innovative is NatWest's "Committed Overdraft." It's designed to remove the anxiety associated with traditional overdrafts which are payable on demand and can be withdrawn on a whim. The Committed Overdraft provides a clear commitment for up to 12 months on both secured and unsecured overdrafts at no extra cost. But ask about other forms of funding such as leasing, factoring and "asset-based" finance.

Try and avoid cash and cheques whenever possible. Anything automated - BACS, standing orders, Internet banking etc - tend to be cheaper. If appropriate, pay your staff and suppliers automatically and get your customers to automate your payments. Visit BACS and Direct Credit to see how this might be achieved. Can you make payments by debit or credit card rather than cheque? Take cash out by using a cash machine. Make fewer withdrawals and pay in less often unless you are likely to get high returns on your deposit account.

Finally, don't forget to haggle! In business finance everything is negotiable. You can negotiate - or re-negotiate - such things as the rate of interest on a loan, when repayments for a loan should start (anything between immediately to 12 months hence), levels of secure and unsecured borrowings and even the standard bank charges.

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