Considering Closing Your Business Bank Account?
There are several reasons that you may choose to close your business bank account, these include if you have ceased trading or you want to switch accounts. Read on for how to close your business account and a handy checklist of key considerations.
Running a business can be stressful and very time-consuming. The to-do list can seem endless and you can often feel like you’ve got too many plates spinning at once.
So, it’s no wonder that closing your business bank account may seem like too much hassle.
It would explain why 63% of business owners haven’t switched their business account in five or more years, according to research by Revolut.
However, it also found that 42% were looking to do so in the following 12 months, as business expectations and demands changed.
So, why would you close your business bank account and how do you go about it?
Why might I want to close my business bank account?
One reason to close your account is that you are shutting down your business entirely. But it may also be about wanting to switch to a different account provider.
There’s a good chance that when it came to opening a business bank account, you didn’t look much further than the bank with which you already held your personal current account. It made sense at the time – you were familiar with the brand and it felt convenient to keep your accounts under one umbrella.
But by not checking out the other options, you could have ended up with a business banking account that doesn’t meet all your needs. Perhaps it doesn’t give you the level of service you want or doesn’t offer as much value for money as some of the alternatives out there.
This is more likely to be the case if you’ve had the same account for a few years. As the market has evolved, different types of accounts have become available, more providers have entered the market, costs have become more competitive and the range of services has expanded.
Keep in mind, of course, that moving to a new provider doesn’t necessarily mean you have to close your existing account. There may be advantages in keeping more than one business bank account, such as wanting to try out a new provider (for example, a new digital entrant) before deciding whether you want to throw all your business in with them.
How do I close my business bank account?
The process is the same as you’d follow when closing a personal bank account. Under the current account switch guarantee, you can switch a current account from one participating bank or building society to another in seven working days, free of charge. More than 40 banks and building societies are signed up to the service, including all the main brands operating in the UK.
The responsibility for managing the switch lies with the bank that you’re moving to. This means they look after the elements that you might be worried about, such as transferring all the payment orders you have in place (covering payments in and out, including direct debits and salary payments).
Your new bank will also redirect any payments accidentally made into your old account for a minimum of three years.
It also has to cover any charges that are incurred or interest that’s lost due to any problems during the process of switching.
Meanwhile, it’s up to the bank that you’re leaving to make sure that your old accounts are closed properly.
The Current Account Switch Service is available to all small businesses with less than 50 employers and turnover below £6.5m.
What else do I need to consider?
There may be certain loose ends that need tying up before you can close an account. For example, you will likely be asked to repay any outstanding loans that you have before you can close it. Your business bank account provider may also insist that you clear any overdraft you have and pay any pending charges on your account.
It’s possible you’ll be able to transfer any negative balance you have, but you’ll need to check with both banks.
If you’re transferring to a different provider you should check the terms and conditions of your new account and discuss any concerns you have or clarify anything that’s not clear before you close your old account.
Checklist for closing a business bank account
While the banks involved are responsible for closing and transferring business accounts, there will be a few things you’ll need to provide. These include:
- the name of your business.
- the history of your trading address (or addresses).
- business details (including current banking details, registration number, date of incorporation if you are a limited company).
- details of any debts.
- personal details about yourself and other directors.
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Jeff is a freelance journalist who writes across finance & business. He was the personal finance editor at The Scotsman & Scotland on Sunday & a member of the Financial Services Consumer Panel. Read more