Money for nothing or cheques for free

If you are a sole trader you don't have to have a business account, though it will help you keep your earnings separate from your personal finances. If you are a limited company then you do need a business bank account and you need to think about what type of transactions will go through your books each month. If you only write a small number of cheques and most of your credits are automated, you may find that an account offering free banking is the best for you.

If, on the other hand, you write more than 50 cheques a month and have a lot of small payments coming in, then you will be better off with an account that has a fixed monthly fee, rather than one that charges separately for each cheque or credit over a set limit.

'Free banking tends to mean that the number of free transactions is limited and you have to keep your account in credit,' says Jane Dawson of Moneyfacts.

'There are also accounts that offer free banking for an initial period. New businesses can get 12 months of free banking with Alliance & Leicester and HSBC and 18 months' free banking from Abbey.' Barclays also has a number of free banking offers for start-ups and switchers of between six and 18 months, depending on whether they also maintain a personal current account.

Alliance & Leicester Commercial Bank offers start-up companies a year of free banking. Existing businesses can choose between free banking with a limit of 50 non-cash transactions each month, a flat fee account, or a current account designed for cash-based businesses.

'The main resistance to changing accounts is inertia and the hassle factor,' says Ross Keany, spokesman for Bank of Scotland's business current account, which is the business banking brand for the Halifax. BoS has a third of the business market in Scotland but just 6 per cent of the total business market at present, and is looking to expand its customer base. 'To make it easier we offer one named dedicated contact to help you through the whole switching process,' he says.

BoS offers either an interest-paying current account with a 'relationship manager' who comes to visit you at your premises, or a Direct Business cheque account, which is free as long as you maintain a credit balance of £5,000 and write fewer than 100 cheques a month. There is also a Business Bonus deposit account, which guarantees to beat the standard rates of all the big four banks, and an offset business mortgage.

Abbey's Business Free Banking Forever was launched in January 2002 and offers free direct debits, standing orders, cheques and ATM withdrawals. What it doesn't have is a branch service, so it's not ideal for businesses with a lot of cash to pay in over the counter. Abbey has just 3 per cent of the market but is aiming to grow that share.

Kirsty Sugrue, spokeswoman for Abbey, says: 'We felt customers of the big four banks were being slightly ripped off and we wanted to offer something different.' Abbey pays interest on credit balances and offers a commercial mortgage.