No Credit Check Business Bank Accounts

Understanding ‘No Credit Check’ Business Bank Accounts

For new business owners, particularly those with a poor or limited credit history, the thought of a credit check can be a significant barrier to opening a business bank account. A ‘no credit check’ business bank account is designed to solve this problem. These accounts allow individuals to open a business account without undergoing a ‘hard’ credit search, which is the type of check that can impact your credit score.

It is important to understand that ‘no credit check’ does not mean no checks at all. While you may avoid a deep dive into your credit history, you will still need to go through more basic ID checks, for example to prove who you are and where you live. The key difference is that the provider’s decision to offer you an account is not primarily based on your past financial behaviour.

Why Most Banks Perform Credit Checks

Traditional banks perform credit checks primarily to assess risk. When a bank offers a business account, they are often also assessing your credit worthiness. A credit check gives them insight into how you have managed debt in the past and helps them decide whether to lend you money now or in the future, and the check also means they only deal with lower risk customers. For basic accounts that do not offer any form of credit, the risk to the bank is much lower, which is why some providers are willing to forgo the hard credit search, but this does mean the provider will likely charge you more to offset the less likely outcome of being able to provide you with credit – which is how all providers make their money. 

Who Can Benefit From These Accounts?

A no credit check business account can be a vital financial tool for a range of business owners:

• Individuals with a Poor Credit History: There are a number of reasons your credit score could be low. Personal circumstances such as multiple addresses in 3 years, or not correctly registered to vote can all be factors. Most common is the damage caused by defaulted payments for bills or forms of credit. A no credit check account could offer a workable alternative.
• New UK Residents: People who have recently moved to the UK often have no established credit file, making it difficult to pass a standard credit check.
• Young Entrepreneurs: Business owners who are young may not have had the time or opportunity to build up a significant credit history.
• Those Wanting to Avoid a Hard Search: Some individuals with good credit simply prefer not to have a hard search recorded on their file, as multiple hard searches in a short period can temporarily lower a credit score.

Typical Features and Limitations

These accounts provide essential banking facilities but are ‘basic’ in nature.

• Core Functionality: You will get an account number and sort code, and the ability to make and receive payments via bank transfer (such as Faster Payments, BACS, and CHAPS). You will also likely be issued with a debit card for spending.
• No Credit Facilities: This is the most significant limitation. These accounts almost never come with an overdraft facility, chequebook, or an associated business credit card. The entire model is based on not providing credit, thereby removing the risk for the provider.
• Potential Fees: While some basic accounts are free, others may come with a monthly fee. It’s also important to check on the associated costs and fees related to various types of banking activity, such as transaction costs.

How to Apply

The application process is usually straightforward and completed online or via an app. You’ll need to provide:

• Proof of Identity: A valid photo ID like a passport or driving licence.
• Proof of Address: A recent utility bill or council tax statement.
• Business Details: Basic information about your business, such as its name and what it does. If you are a limited company, you will also need your Companies House registration number.