FNB, Standard Bank, Absa and Nedbank are leading the way in supporting solopreneurs. But what should you know before you apply for an entry-level business account? Angelique Ruzicka investigates.
Solopreneurship (a reference to individuals who start businesses – in some cases without a formal company structure) has been on an upward trajectory in recent years in South Africa.
Many solopreneurs and part-time hustlers, which include more than 600 000 of FNB’s own clients, have been using their personal accounts for their business and side-gig transactions. This can cause confusion, particularly when transactions need to be separated for tax purposes.
To address this problem and the needs of the self-employed, leading banks in South Africa have created specialised bank accounts for solopreneurs.
These include the FNB First Business Zero; Nedbank Startup Bundle; Standard Bank MyMoBiz & MyMoBiz Plus; and the Absa Business Evolve Lite & Business Evolve Core.
So what are the benefits and charges involved and can you find ways to reduce the banking fees you pay?
The benefits
FNB’s side hustler account, the First Business Zero account, is the newest entrant. It allows customers to manage their personal and business affairs from one account.
The concept is nothing new though. These typs of solopreneur accounts are offered by its rivals too and are easy to open.
“Anyone with an idea can start a business. You do not have to register with the Companies and Intellectual Property Commission (CIPC) to open a business account,” explains Tracy Afonso, executive head: Nedbank Segment Strategy and New Business.
“There are benefits to registering a separate entity, but it’s not required to get started.”
You don’t even have to have a minimum balance to open these accounts or, in some instances, pay monthly fees. But if your turnover increases you may need to upgrade to a different offering.
For example, Absa’s Business Evolve Lite has no monthly fees for businesses with an annual turnover of less than R1.5m. However, its Business Evolve Core applies to those with an annual turnover of up to R5m – again with no monthly fees.
With FNB, however, you can use its entry-level First Business Zero account or the Gold Business account for turnover up to the R5m mark; thereafter it offers the Platinum Business account for turnover between R5m and R60m.
Perks, such as business accounting software and tools, and business coaching, are often included with entry-level business bank accounts, which typically also offer linked savings accounts.
“We provide access to funding linked to our transactional offerings as well as the ability to earn interest on surplus funds by using our savings and investment products,” explains Chris Wood, managing executive product of Absa Relationship Banking.
Some link up to their respective reward schemes. FNB’s Solopreneur Bundle, for instance, offers customers a once-off eBucks allocation upon activation, as well as 50% back in eBucks on tax return submission fees through its partnership with online tax filing solution, TaxTim.
The fees
A direct comparison between bank accounts is always difficult. Some accounts are pay-as-you-transact (PAYT), whereas others are bundled transactional accounts where you get a certain number of transactions free before fees apply.
PAYT accounts could work out to be more expensive if you transact frequently, but can suit budget-conscious solopreneurs who only do a few transactions a month.
Entry-level accounts typically charge no monthly fee, however, as you upgrade or if you choose a bundle account, you could be charged a monthly fee.
Standard Bank, for instance, offers a MyMoBiz account which is a more affordable entry-level business transactional account that charges per transaction. Its all-in-one solution, MyMoBiz Plus, charges a service fee of R150 per month but it comes with a number of free included transactions, such as 10 electronic payments, 10 salary payments to Standard Bank accounts, one immediate payment, three cash withdrawals at Standard Bank ATMs, cash deposits at a Standard Bank ATM up to R25,000, and unlimited debit orders to name but a few perks.
Absa also offers two options. Both the Business Evolve Lite and the Business Evolve Core charge no monthly fees. However, the Core offering has heftier transaction charges such as R7.50 for an immediate-payment transaction, R0.90 per R100 or part thereof for cash withdrawals from an Absa ATM, and a whopping R68 +R2.20 per R100 or part thereof for in-branch cash withdrawals.
FNB’s Business Zero charges no monthly account fee and offers unlimited free card swipes. ATM cash deposits and withdrawals attract a fee of R9 per R1 000 or part thereof. As with most banks, in-branch transactions are expensive, with a R57 cash-handling fee on top of R4 per R100 for cash deposits and withdrawals.
Meanwhile, the Nedbank Startup Bundle charges no monthly fees for the first six months and includes 20 transactions with one cash withdrawal a month, eNotes, a dedicated relationship banker, and services like SimplyBiz ‒ a blog offering help and mentorship to small businesses.
“After the six months is over, PAYT fees apply, so you only pay for the transactions you use. It provides much-needed free relief so the business owner can focus on setting up and managing their business. Nedbank clients also qualify for a PocketPOS merchant device at a once-off fee of R89 to make payment acceptance easier,” says Afonso.
When comparing fees, it’s important to consider your unique transactional behaviour. “Careful discernment is necessary when comparing fees across banks. It is important to calculate your total cost of banking. Solopreneurs should also review their current package on a regular basis to ensure it meets their changing needs,” says Wood.
Tips for solopreneurs to cut banking fees
- Transact digitally as much as possible as these transactions are typically cheaper or free.
- If you transact frequently see if a bundle option works out cheaper.
- Do you make use of professionals like business coaches? Some banks offer access to them as a free perk.
- Don’t transact over the counter – you’re likely to be charged far more than you would using an ATM.
- Keep track of the number of free transactions you have in a month and work in those parameters or be aware of any introductory offers that may fall away (such as Nedbank’s zero fees for six months) and budget for the reintroduction of fees.
This article first appeared in City Press.
Very helpful. Thank you!