Bad Credit Business Bank Accounts

The Challenge of Opening a Business Account with Bad Credit

For an entrepreneur, securing a business bank account is a fundamental step. However, if you have a poor personal credit history, which might include issues like defaults, this can become a significant hurdle. Mainstream high street banks often conduct thorough credit checks on the directors or owners as part of their application process. A low credit score can lead to a rejection, leaving business owners unable to access essential banking services.

This is because traditional banks view a poor credit history as an indicator of higher risk, particularly when it comes to offering credit facilities like overdrafts or loans. For them, it’s a core part of their risk assessment. This can feel like a catch-22 situation: you need a bank account to run your business effectively and improve your financial standing, but you can’t get an account because of past financial difficulties. Fortunately, there are some specialist providers and account types designed for this situation.

How ‘Bad Credit’ Business Accounts Work

Accounts designed for those with poor credit operate on a different model. They focus on providing the core transaction services a business needs, without offering any form of credit.

• No Hard Credit Checks: The main feature of these accounts is that the provider will typically not perform a ‘hard’ credit check that would analyse your credit history for a potential lending decision. This also means you will not have another hard credit check on your file.
• Identity Checks are Still Mandatory: It’s vital to understand that ‘no credit check’ does not mean no checks at all. You will still need to verify your identity and address.
• No Lending: These are fundamentally “pay-as-you-go” or “prepaid” style accounts. Since the provider isn’t lending you any money, their risk is significantly lower. The account will not come with an overdraft, chequebook, or an associated credit card.

Who Provides These Accounts?

• E-Money Institutions (EMIs): A large portion of bad credit business accounts are offered by Electronic Money Institutions rather than traditional banks. Providers like Zempler, Card One Money, and ANNA Money can help in this area.
• Basic Bank Accounts: The accounts available to those with bad credit will be more basic than those with good credit profiles with no access to credit facilities. High street banks do consider basic accounts, with less stringent checks for new customers but it’s not likely to fully exclude some form of credit check. However, if you’re an existing customer they may be willing to work with you to find a solution, so it is worth talking to them. .

Key Features to Expect

While you won’t get credit facilities, these accounts usually provide all the essentials for running a small business:

• A UK account number and sort code.
• The ability to send and receive electronic payments.
• A business debit card for purchases.
• Online and mobile app banking for managing your finances.
• Some accounts offer additional features like invoicing tools and spending categorisation.

It’s important to review the fee structure carefully. Some accounts may have a monthly fee, as well as charges for transfers, cash deposits, and withdrawals.