Start-up Community Business Banking

I find that many unincorporated groups simply ask one of their members to pay in money into their personal bank account. However, this puts a lot of the responsibility on the shoulders of one person, has no security and may even contravene the terms of their account and lacks transparency and fair accountability.

Others may ask their local Parish Council or a local Charity if they would allow monies to be paid in to their account and held until the group has its own bank account. This may also allow for payments to be made by the host organisation for expenses incurred by the group, for things like registration costs, surveys and valuations from a ring-fenced budget.

Some grant-making bodies may allow funds to be paid over to a Parish Council bank account for example, as long as they agree to be accountable until the funds can be transferred to the organisations own bank account when incorporated.

More formal financial arrangements, known as ‘fiscal hosting’ is offered by several providers, including VCS Academy, The Social Change Nest and The Social Innovation Partnership.

This is a service that allows grassroots groups, community initiatives, and emerging non-profits to operate legally and manage funds without needing to set up a separate legal entity right away.

There are charges for this service and it can take up to two weeks to set up your account, but it may provide an interim solution for early-stage groups receiving grants and donations.

Using a Crowdfunding platform is helpful in building membership, and audience and processing donations and eventually Community Shares.

Some local Credit Unions also offer corporate accounts to community groups to pay in money but do not offer full retail banking services like current accounts or loans.

You may be tempted to set up an online business bank with some of the new providers such as Mettle, Monzo, Tide, Starling or Revolut, but there are some things to consider before doing so. Many only accept sole traders or limited company Directors. Many are not UK based and your money may not be guaranteed under the FSCS.

Similarly, some electronic payment platforms also offer banking type services, such as Sum Up. However, the free account has limited functionality and the Plus business account costs £15 per month. Would your account work with any EPoS system or your accounting software?

Ideally you would be able to apply for a business bank account with a high street bank as an unincorporated association that can be updated when your legal structure is registered. Often the high street banks struggle to recognise less familiar legal forms such as Community Benefit Societies, but there are some that do, including The Cooperative Bank and Unity Trust, who have a good understanding of the community ownership sector.

I would say that the critical deciding factor should be how easy it will be to convert from a ‘Treasurer’s’ or ‘Clubs, Charities and Societies’ bank account to a business bank account.

Do try to have a real conversation with someone either online, a virtual assistant, website chat or, however unlikely, in person on the phone or in branch to confirm that the bank can help you make the transition.

1. Adopt a simple constitution
2. Appoint a Treasurer
3. Draft a financial policy
4. Check if you can use a host bank account
5. If not, check if you can get the services you need from a local Credit Union, fiscal hosting service or online bank account as an unincorporated organisation
6. If applying to a retail bank for a Clubs, Societies or Community Group bank account make sure that you will be able to change the name when incorporated and keep your account and not be switched to a costly business account later
7. Register your preferred legal structure as soon as possible