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Business Banking: Too Expensive for SMEs?

The big news surrounding the availability of finance for small business has mostly been the increasingly tough task of securing business loans. More small companies are slipping into ‘risky’ credit status, and with banks looking to minimise their risky debts, this is a recipe for disaster. However, there are other factors that are squeezing small businesses hard when it comes to using business banking facilities – fees and transaction charges are taking an increasingly large lump of cash from many small and medium businesses. Alternative finance could perhaps provide some welcome relief.

Small businesses and SMEs are spending more than £2.3bn each year on these added fees purely to use basic business banking facilities. Businesses are also missing out on the chance to earn interest on business accounts, but will still incur extra fees. This survey by YouGov found that a quarter of small businesses pay on average £1,792 on business banking charges each year – it’s obvious that finding free or more affordable business banking is becoming increasingly tough.

In fact, over half (52%) of businesses interviewed said they would consider moving or changing accounts if they were able to receive a more affordable service. More and more people have become increasingly vocal about the charges that they’re subject to – this not only true for businesses but also for consumers. Many people are paying close to £900 just for going accidentally overdrawn.

Businesses who need a flexible way to access more cash flow without resorting to expensive overdraft facilities can turn to invoice finance as a way to fund growth and day to day running. This is a flexible way to finance your business, using the funds tied up in unpaid invoices to help you get a bit more breathing room. If bank fees are getting you down, it’s definitely worth looking at your other options.

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