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- Can’t open a business bank account? Find out why and what you can do
Why can’t I open a business bank account?
Having trouble opening a business bank account? Here’s what you need to know.
Getting rejected for a business bank account can be frustrating. But it doesn’t necessarily mean you can’t open a business bank account at all.
If it happens to you, it’s important to understand what you can do to increase your chances of getting accepted for an account next time you apply.
At a glance
Common reasons for a business bank account rejection include incomplete documentation, verification problems, a limited credit or trading history, or a high-risk or complex business structure
If you’re rejected for a business bank account, try to find out why and check your application form for mistakes
If necessary, take steps to improve your credit score before applying again
It’s often easier to open a business account with an online or challenger bank than with a traditional high street bank
Find the right bank account for your business
Reasons why you’ve been refused a business bank account
There are many reasons why you might be rejected for a business bank account. Different providers have different criteria when assessing whether they are happy to accept you as a customer, so you might find you’re rejected by one, but accepted by another.
We’ve outlined some of the main causes of rejection below:
1. Identity and verification issues
Banks must confirm your identity and prove that your business is legitimate before opening an account. This process, called Know Your Customer (KYC), forms part of the UK’s anti-money-laundering rules. If the bank can’t verify who you are or confirm your company’s details, it will reject your application.
You’re more likely to run into problems if you don’t provide the required proof of identity or address, if your company has overseas directors or shareholders without a UK address or tax residency, or if your business isn’t registered with Companies House or HMRC.
2. Incomplete application
If you fail to complete your application form correctly, you risk being rejected. Common red flags for banks include missing information about directors, shareholders or company structure, or incorrect company registration details.
Likewise, if you fail to provide the necessary documentation, such as bank statements, proof of trading and company accounts, you may struggle to open a business bank account.
3. Poor or limited credit history
Banks often perform a credit check when you apply for a business bank account, especially if you are also applying for a business overdraft. If your company has a poor credit rating due to debt issues, this can suggest your business is high risk, and a bank may ultimately decline your application.
If your company is new, it may not yet have a credit history, which can also make approval more difficult. In these cases, banks often review your personal credit record to assess how well you manage money. This is also the case for sole traders, who don’t have a separate business credit rating.
4. High-risk business activities
Banks consider certain industries, such as gambling, cryptocurrency and weapons businesses, as high risk due to fraud and compliance concerns. Many banks stipulate in their eligibility criteria that they don’t accept business account applications for companies in these sectors.
5. Lack of trading history
Some banks don’t offer business accounts to companies that have only been trading for a few months. They should state this in their terms and conditions, so be sure to check before you apply.
6. Previous account closures
If a bank has closed a previous account of yours in the past, perhaps due to suspicious payments or a breach of the terms and conditions, you’re likely to find it much more challenging to open a bank account again.
7. Complex business structure
If your business has a complicated ownership or control structure, banks may find it harder to verify who ultimately owns or benefits from the company. If a bank can’t verify the ownership chain, it will reject your application.
What to do if you’ve been declined for a business bank account
If a provider has rejected your business bank account application, follow the steps outlined below:
1. Find out why
Before you make any further applications, try to find out why the bank rejected you. Banks don’t always tell you, but there’s no harm in asking.
2. Check your application
If you can’t find out why, check your application to ensure you didn’t miss any pages, forget to supply certain documents, or make a mistake. This could be something as simple as misspelling your company name.
Also check that you didn’t miss anything in the eligibility criteria. Many banks stipulate that you must have been trading for a certain length of time and may have minimum turnover requirements.
3. Check your credit rating
It’s sensible to check both your personal and business credit records to ensure these contain no mistakes. Even simple errors, such as an incorrect address, can affect your credit rating. If you spot anything, get it corrected as soon as possible.
If your business credit score is low, you may want to take steps to improve it, such as paying bills and suppliers on time and settling existing debt.
4. Appeal the decision
If you think you’ve been rejected unfairly, consider appealing the decision. You can only do this if your company group turnover is £25 million or less, and you must appeal within 30 days of your original application. The bank should respond within 30 days.
5. Apply again
If your appeal is unsuccessful, it’s best to wait three to six months before applying again. Be sure to compare accounts carefully and check the eligibility criteria thoroughly.
If you’ve been turned down by a traditional high street bank, it’s worth applying with one of the many online banks that now offer business accounts. These often have more lenient criteria, so you may have better luck with one of them. You can view the eligibility criteria for some popular providers below:
Note that if you’re a sole trader, you can often use a personal bank account for business transactions (if the provider permits this). However, opening a separate business account offers a range of benefits, including helping you to complete your tax returns on time.
FAQs
Why is it so difficult to open a business bank account in the UK?
Banks must check every applicant thoroughly to prevent fraud and money laundering. This means it can be trickier to open a bank account if you’re a startup or small company. But that doesn’t mean you won’t be able to open one at all – the key is to shop around and compare eligibility criteria carefully.
Can I apply for a business bank account with bad credit?
Yes, you can apply for a business bank account with bad credit, but you may have fewer options. You may find it easier to get a business account with an online provider than a high street bank, because these often have more lenient criteria.
If one bank declines my application, could others do the same?
Not necessarily. Banks use different criteria when assessing whether to accept an application, so you may find you’re rejected by one but accepted by another.