What to do if you’ve been rejected for a business bank account

What are the requirements for opening a business bank account?

To open a business bank account with a UK bank or building society, you typically need to be:

• At least 18 years of age

• A UK taxpayer

• A registered sole trader or director of a limited company with a UK address

You also usually have to pass the credit checks the bank will carry out on you and your business. These checks investigate your current financial situation and any previous issues, such as unpaid debts or bankruptcies.

What documents do you need to provide for a business bank account application?

The documents you need to provide to open a new business bank account will vary between account providers. However, most ask for:

• Proof of identity – a valid ID such as a passport or a photocard driving licence  

• Proof of address – a recent bank statement, utility bill or another document, such as a tenancy agreement

• Proof of your business name and set up – official correspondence from HMRC or supplier invoices dated within the last three months

• If the business has several directors, you’ll also need to provide ID and address details for each one

• If the company or any of its directors have an adverse credit history, it’s sensible to provide documents showing when and how this was resolved

Why do banks reject business bank account applications?

Banks don’t usually tell you why they rejected your business bank account application. So, it’s not always easy to work out where you went wrong.

However, many factors can make opening a business bank account harder. Often, these centre on concerns relating to financial crimes such as money laundering.

Reasons a bank might reject your business bank account application include:

• You operate in a ‘high-risk’ sector such as gambling or weapons and defence

• You or the other company directors are based outside the UK or are foreign citizens

• You or your business have a less-than-perfect credit history

• Your company’s registered address is outside the UK

• You operate in other countries and need to make and receive international payments (particularly if your customers, suppliers or workers are based in countries that are considered high risk for political or economic reasons)

• Your business has a complex ownership structure, perhaps involving a holding company or an international partnership

• Your business is a brand-new start-up with no financial history or track record

What should you do if you are refused a business bank account?

If your business bank account application is rejected, the first thing to do is try to determine why. Banks don’t usually explain their reasons for turning down account applications, but it’s worth asking because finding out why your application was rejected can clarify your next step. If you are unable to find out why your application was unsuccessful, a sensible first step is to check that the documents you provided with your application were all correct and dated within the required timeframes. 

A simple mistake, such as providing outdated financial statements or mistyping your company name or address, can easily lead to your application being rejected out of hand.

Once you’ve verified that the information you provided was accurate, it’s time to check your personal and business credit files to see if there are any errors, omissions or circumstances that could have caused your application to be rejected. 

In some cases, simply updating your address could be enough to change the outcome of your next attempt to open a business bank account.

In others, you may need to tidy up your file by closing old, unused accounts. 

If you suspect your application was rejected for another reason, such as your lack of a financial track record or the industry or sector you operate in, you may wish to look at business bank accounts offered by online banks that are willing to consider account applications from companies like yours.

On the other hand, if you need to make or receive overseas payments, you may have more luck with a provider that offers multi-currency business bank accounts.

What are the alternatives to a business bank account?

You might not always need a business bank account. UK-based sole traders, for example, are not obliged to have a business bank account – they can simply use their personal current account for business transactions.

However, this can lead to confusion – particularly when it comes to doing your taxes – and means you’ll miss out on business bank account benefits, such as a business overdraft or a small business advisory service. 

If you’re having trouble getting approved for a business bank account from a traditional high street bank, you can also try one of the numerous online banks now offering accounts for businesses in the UK. 

These online providers are often more willing to consider applications from companies that have struggled to open a business bank account in the past. Moreover, their account charges are often lower than mainstream banks and building societies.

Just make sure the online bank you choose is regulated by the FCA so that your money, up to a limit of £85,000, is covered by the FSCS scheme if the bank fails.

Can you open a business bank account with bad credit?

Yes, some banks offer business bank accounts to individuals and companies with poor credit histories. 

However, to be accepted as a customer, you generally have to provide detailed information about your credit history and evidence of the steps you’ve taken to avoid encountering similar financial problems again.