A Guide to Basic Business Bank Accounts
A basic business account offers the basic functionality a business needs to manage its finances. These kinds of accounts are often used by business owners with poor credit histories. Read on to learn why you might use a basic business account and its pros and cons.
Most banks will only give their standard business bank accounts to people with squeaky clean credit histories. But luckily there are options available to those with an adverse credit history who still need a business bank account. There are some accounts on the market now which don’t require you to pass a credit check and can help you repair a damaged credit file or build a new one if you don’t have any history yet.
Here are some of their main features explained.
What is a basic business bank account?
As the name suggests, a basic business bank account gives you just the basics you need to run your company’s finances. It will usually give you a debit card or a prepaid card you have to load with cash to prevent overspending. It will allow you to make deposits and withdrawals but won’t typically give you any borrowing facilities such as an overdraft.
Why might you opt for a basic account?
You might choose a basic business account if you’ve been, or are likely to be, rejected for a mainstream bank account. This could be because you’ve got a poor personal credit history, you’ve got defaults or late payments on your credit report, there’s a County Court Judgment against you or you’ve been declared bankrupt. It could also be because you don’t have much of a credit history – perhaps you’ve been working or living abroad, or you’ve not taken out credit before.
If you’ve moved house frequently, you have access to a lot of available credit or you’ve recently made several credit applications, even if you’re meeting all your repayments, this can make lenders worried you’re a risky prospect. Having a basic business bank account can allow you to repair a damaged credit record or build one from scratch so you can eventually get access to a wider range of mainstream bank accounts.
Pros and cons of a basic business bank account
- There’s no credit check.
- Some accounts offer guaranteed acceptance as long as you pass business, identity and residency checks.
- You may be able to open a basic account even if you have an undischarged bankruptcy or you have an IVA (Individual Voluntary Arrangement) in place to deal with debts.
- You will have access to basic banking facilities, including online services.
- You can use a basic bank account to repair a damaged credit rating, or build up a credit history where you didn’t have one before. Then you can move on to a standard business bank account in the future.
- You might have to pay a monthly or annual fee to run the account.
- You might pay more in fees and charges.
- You might not earn interest on balances (although not many business bank accounts will be paying much interest on balances these days anyway).
- Some facilities may not be available, such as writing or paying in cheques.
- There could be a maximum allowed balance.
- You might be given a prepaid card, instead of a debit card, which you have to pre-load with cash before you can use it to make payments, and there could be an upper limit on the amount you can preload.
- You may not have access to borrowing facilities such as an overdraft, loan or credit card and, if you do, they will likely be at higher rates than you would get from a mainstream lender.
What checks will I have to pass?
With a standard bank account, you’d normally have to pass a credit check, but a basic bank account doesn’t require one. You will need to provide the usual proof of identity and address though, and evidence of what your business does.
How long does it take to open a basic business bank account?
It should be quite a quick process if you apply online. Some banks offer a decision in minutes, and others may take up to a day or longer.
If you’ve got poor credit, don’t despair, you can still run your business finances with a basic business account. You can find some in our business bank account section below.
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Hannah is an award-winning journalist with a background in the trade press. She writes about finance, asset management and business for Shares, Citywire, FE Trustnet, and interactive investor. Read more