Can European Banking Services Help UK Businesses?

The European Union encourages member states to do business across geographical boundaries. Furthermore, the UK Government urges entrepreneurs to look to Europe for opportunities to sell British products and services.

For many businesses, expansion into Europe makes sense. But entrepreneurs sometimes hesitate. Expansion requires capital. It also needs an efficient European banking system that processes payments.

It’s therefore reasonable for entrepreneurs to ask whether European banking services can help UK businesses. Entrepreneurs need to know the answer to certain key questions:

• What banking services are available?
• Do European banking services operate differently from those in the UK?
• What fees and conditions are entrepreneurs likely to encounter?
• Is it possible for a UK entrepreneur to borrow money from a European bank?
• Is it necessary to have a bank account in Europe? Or can entrepreneurs use UK banks to conduct their business?

Single European Payment Area

Before addressing these questions, however, entrepreneurs need to find out just how committed the European Union is to accessible banking. A lack of commitment can mean delays in payments. It can also lead to problems with currency exchange.

The Single European Payment Area (SEPA) initiative helps to put entrepreneurs’ minds at rest. SEPA gives entrepreneurs and private customers the chance to make debit and credit card payments in euros to anyone in the eurozone.

What this means in practice is that domestic and European debit and credit card payments follow the same principle. Even the issue of currency exchange is straightforward.

Entrepreneurs who step cautiously into the European market, and initially do business with their existing debit and credit cards, will discover that matters run smoothly. At a basic level with modest payments, entrepreneurs may not need to worry about using any other banking service in Europe.

What Banking Services Are Available?

But business is more complex than making simple payments by bank cards. Many entrepreneurs who intend to operate in Europe need a range of banking services.

The good news is that European banks offer much the same services as their UK counterparts. Business advice, electronic payment systems, telephone banking and Internet banking are common.

How Do These Services Differ From Those in the UK?

As already mentioned, most European banking services work in the same way as those in the UK. The one area to exercise caution, however, is with overdrafts. In France, for example, unauthorised overdrafts are illegal. An entrepreneur who goes overdrawn without previously coming to an arrangement with his or her French bank can lose the right to have an account.

The conditions for setting up a bank account also differ in Europe. Although an entrepreneur can open an account in any part of the European Union, each country has different rules for references, credit checks and documentation. An entrepreneur should learn the rules before applying for an account.

Those entrepreneurs setting up limited liability companies in Europe also face a specific demand. They must deposit at least 25% of share capital in the account.

What Are the Fees and Conditions?

Like UK banks, European banks charge fees for business accounts and impose conditions. Entrepreneurs should always ask a European bank for full details of charges and terms.

Some European banks charge a fee for every business account transaction. They also make a quarterly charge.

Is it Possible to Borrow Money from European Banks?

UK entrepreneurs can apply to borrow money from European banks to finance their enterprises.

The banks will first ask entrepreneurs for a business plan. The plan should be in the language of the country. It should also have a financial plan; a marketing strategy; an explanation of start-up costs; and summaries of the company and of the plan’s purpose.

Can Entrepreneurs Use UK Banks for European Transactions?

For many entrepreneurs, the easiest way to do business in Europe is to speak to their UK banks. These banks may suggest opening euro accounts. Furthermore, good UK banks have experts available who can advise about European law and tax.

Before committing to open a euro account, entrepreneurs should check the terms and conditions. They should also pay attention to currency exchange rates and the associated fees when transferring money to a sterling account.