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Selecting the right business bank account is an important task when setting up as an IT contractor for the first time.

There are several key things to consider - such as transaction and borrowing costs, what facilities the bank offers, and the type of relationship you want from a bank.

Here are some suggestions which may help you decide which bank would best suit your needs.

Separate bank account

You must set up a separate business account if you're forming a limited company, as your company finances are completely distinct from your personal funds. If you are a sole trader (which is unlikely), you can continue to use your personal account for your business income too, although a separate account would always make things easier.

Your current bankers

Don't necessarily choose a business bank account simply because you are a personal banking customer. You may well feel more comfortable with a bank you already know personally, and benefit from having 'linked accounts' with the same bank, however you may find that the service offered by other providers may be superior as a whole.

Established, trusted players

Research banks that have a strong background - names you will have heard of, or even internet banking brands which are owned and operated by the big players.

Bank charges

A key point to consider is how much it will cost you to have a business bank account. You may have a large number of monthly transactions to process, for example, so ensure you know exactly what charges will be levied on your account before signing up. Most of the major banks offer up to 2 years' free banking to new companies, although the promotions are far less generous if you're an established business.

Online business banking

This is an increasingly important service, and most banks now provide an internet service so you can check the status of your account day or night. At Contract Eye, and our previous businesses, this is an essential service. Rather than ringing the bank to check if a payment has been made to your account, you can do this yourself in a fraction of the time.

Interest

Although the BOE bank rate is at an all time low, the amount of interest paid on business accounts does vary wildly. Many banks do not pay any interest on business current accounts, although there are exceptions (such as Santander). You are more likely to realise some interest on business deposit accounts, which are useful if you're putting money aside to settle future tax liabilities.

Small business specialists

Go for a bank which has a specialised small business unit. The setup process should be simpler, and dedicated teams will be used to dealing with all types of small business and their specific needs. Some IT contractors will require regular contact with their bankers, so you should go with a team you feel you can build a good personal relationship with.

Current banking offers

Here are some of the best banking deals for new contractor companies, courtesy of our sister site Bytestart:

• Barclays - 2 years' free business banking here.


• Santander - banking, up to 5% AER on balances here.


• Lloyds -18 months' free banking here.