How to get a business bank account with bad credit

Poor credit can make it more difficult to open a business bank account, but it’s not impossible. Some banks and specialist providers cater for those with lower credit scores, although these accounts may come with fewer features or higher fees. Here’s what you need to know. 

At a glance

• You can still get a business bank account with bad credit, but you may have fewer providers to choose from

• Not all providers carry out full credit checks when you apply for a business account

• Business bank accounts for those with bad credit tend to come with higher fees and fewer features

• It’s worth taking steps to improve your credit score before you apply for a business bank account

Can I get a business bank account with bad credit? 

Yes, it’s possible to get a business bank account if you have a low credit score, but you might not qualify for the most competitive accounts available. 

Having bad credit suggests to banks and other providers that you’ve had problems managing your finances in the past, and they could be more reluctant to offer you a business account as a result.

However, while many banks carry out a full credit check before deciding whether to accept your application, some digital-only banks, such as Tide, Zempler Bank and Card One Money, don’t. This means they don’t offer credit facilities such as business overdrafts, but they can be a good option if you’re struggling to get a business account elsewhere.

How to get a business bank account with bad credit 

The key to getting a business bank account with bad credit is to shop around and compare what’s available. Look for providers that don’t carry out a hard credit check to see what they offer. As part of your comparison, consider the following:

• Eligibility criteria – You usually need to be at least 18 years old, a UK resident and a sole trader, partnership or limited company. Some banks ask that you’ve been trading for a set time or have a minimum annual turnover, too. Make sure you meet these criteria before applying

• Account fees – Many 'bad credit' business accounts charge higher monthly or transaction fees than standard accounts. Consider which transactions you’re most likely to carry out and look for an account with the lowest fees

• Features – Some accounts for bad credit come with limited functionality. Check what’s included, such as the ability to make payments, send invoices, integrate with accounting software or receive international transfers

• Credit facilities – Bear in mind that you’re unlikely to qualify for credit facilities such as an overdraft or business credit card if you have bad credit

• Account management – Providers offering business accounts with no credit check tend to be online only. However, some may allow you to pay in cash or cheques at Post Office branches or PayPoints (usually with limits)

How to increase your chances of getting accepted for a business bank account 

There are several steps you can take to boost your chances of getting a business bank account if you have poor credit. For example:

• Apply with the right provider – Challenger banks often prioritise identity verification and business activity over credit history, making them a good starting point

• Keep your business records organised – Make sure your financial documents, such as tax returns and business plans, are up to date, and that you’re ready to provide them if asked

• Take your time – Don’t rush your application because it can be easy to make mistakes – and errors can lead to rejection

• Check your credit report – It pays to keep an eye on your credit report and correct any errors as soon as possible. If you’re a sole trader, you won’t have a business credit score, so banks look at your personal credit score

How to improve your credit score

If you have bad business credit, there are plenty of ways to improve it over time. Consider the following:

• Pay bills on time – Paying suppliers, lenders and service providers promptly can boost your credit score. Late payments can lower it

• Reduce existing debt – Try to lower the balances on any credit cards, overdrafts or loans. Carrying too much debt compared with your available credit can make your business look financially stretched

• Pay tax on time – File your accounts and pay your tax well before the deadline

• File full accounts – If you file full accounts rather than submitting abridged or micro-entity accounts, your credit score should increase, because it provides more information about your company’s financial health

• Update HMRC about company changes – Inform HMRC and Companies House about any changes to your business, such as a new address, as soon as possible so they have accurate information

• Space out credit applications – If you’ve recently applied for credit, wait three to six months before applying again. Each time a provider carries out a hard credit check, your credit score temporarily dips. Lots of credit checks in quick succession can have a bigger impact

If you’re a sole trader, you can still follow many of the above tips to help improve your personal credit score.

Read more...

• Do I need a business bank account?

• Can I use my personal account for business?

• What are the benefits of a business bank account?