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In the UK, the terms business banking and commercial banking may be used to differentiate between a bank’s financial services, depending on the size of the business.
‘Business’ banking generally refers to the services used by smaller companies, including sole traders. ‘Commercial’ or ‘corporate’ banking generally refers to the services used by larger enterprises with a high turnover.
What is business banking?
A business bank account allows you to separate your business finances from your personal accounts, making it easier to keep track of your company’s funds.
Traditionally, business banking has been provided by high street banks. However, in recent years there has been a revolution in banking, with online banks – also known as challenger banks – providing more competition in the business banking sector.
Today, businesses have much more choice, with online banks being able to provide accounts with online tools which help businesses keep track of their finances, such as tax bills and expenses.
Typical business bank account features
Carefully check what each business bank account you’re considering offers as standard. These might include:
- deposits and withdrawals
- standing orders and direct debits
- bank transfers
- overdraft facility
- access to debit and credit cards
- online banking
- telephone banking
- mobile app
- accounting tools
What are the main differences between business banking and commercial banking?
In the UK, business and commercial banking are often the same service, offering similar features.
However, sometimes the terms business banking and commercial banking refer to services aimed at businesses of different sizes and complexities.
The term business banking can be used to refer to small and medium-sized enterprises (SMEs); companies which have a small number of staff and moderate levels of turnover and income.
Commercial banking can refer to enterprises on a larger scale. Medium-sized organisations have more complex banking needs and may use commercial banking accounts – for example, to handle overseas operations and complicated supply chains.
A commercial bank can describe a banking organisation that is designed to provide services for large and medium businesses – the term can also refer to a branch of a bank dedicated to commercial clients only.
Corporate banking is another term you may see when looking for business bank accounts. Corporate banking clients may look for help with issues connected to cash flow and working capital management.
How to choose between a business bank account and a commercial bank account
This will depend on the size of your company, as well as a range of other factors.
A business bank account may be the right choice for a small business, whereas a commercial bank account might be a better choice for medium to large businesses.
The most important step to take when looking for business bank accounts is to compare your options. Then decide which account offers you the best tools and features for your needs, such as whether your account is free or there are account fees, and whether the account offers overdraft facilities. Read our guide to learn if you need a business bank account.
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About the Authors
Peter reports on a number of areas in the personal finance sector, with a particular interest in supporting businesses and individuals in the UK services industry.
Kristina was a writer at NerdWallet who focused on writing finance content for small businesses, as well as young people and students. A recent graduate trading French for finance, she…
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Milly Fox-JonesThe article you've shared delves into the nuances between business banking and commercial banking, offering insights into their distinctions in the UK financial landscape. Let's break down the concepts and related information provided:
Business Banking vs. Commercial Banking
1. Definition and Scope:
- Business Banking: Primarily caters to smaller entities, including sole traders and small to medium-sized enterprises (SMEs). It involves managing day-to-day finances, offering accounts tailored to their needs.
- Commercial Banking: Geared towards larger enterprises with more intricate financial requirements, often including international operations and complex supply chains.
2. Services and Accounts Offered:
- Business Banking Features:
- Separation of business and personal finances through dedicated business accounts.
- Increasingly provided by online banks ("challenger banks") with user-friendly online tools for financial management, tax tracking, and expense monitoring.
- Common features encompass deposits, withdrawals, standing orders, direct debits, bank transfers, overdraft facilities, access to debit and credit cards, online/telephone/mobile banking, and accounting tools.
3. Differentiation Factors:
- UK Distinctions: While often overlapping in services offered, sometimes business banking refers to SMEs, while commercial banking caters to larger, more complex organizations.
4. Choosing Between Business and Commercial Banking:
- Decision Factors: Dependent on company size, financial needs, and complexity.
- Small Businesses: Likely to benefit from a business bank account.
- Medium to Large Businesses: May find commercial bank accounts more suitable due to their expanded features and capabilities, like support for international operations and handling complex financial structures.
5. Choosing the Right Account:
- Key Steps:
- Comparing available options to find the account that aligns with specific business requirements.
- Evaluating factors such as fees, account features, overdraft facilities, and overall suitability.
Authors and Additional Topics:
- Authors: Peter Adams and Kristina Fox, specializing in personal finance and small business finance content.
- Related Topics Covered: Support for UK businesses, finance content for small businesses, challenges faced by women entrepreneurs, issues related to ageism in the workplace, and government schemes like Making Tax Digital.
This breakdown highlights the distinctions between business banking and commercial banking, emphasizing their target audiences, services provided, and factors to consider when selecting the most appropriate banking solution based on a company's size and needs.
