Operating a business can be a struggle in today’s economy; this is doubly difficult for the business entrepreneur that has a history of bad credit. Nearly one hundred percent of banks will perform a credit check before approving a business bank account application. If indebtedness, bankruptcy, or foreclosure haunts your past, it could decimate your chances of opening a business bank account.
Financial institutions utilize an in-house credit system dubbed the “Che x System.” Every late payment, overdraft concurrence, or other similar issue credited to your account lowers this in-house credit score and undercuts your chances of obtaining a business bank account. Luckily, there are some steps that you can take to increase your likelihood of obtaining a business bank account with bad credit.
Probationary Bank Account
This is less than an ideal solution to obtaining your business bank account with bad credit history; however, for some individuals, this is the only available option. These types of bank accounts carry strict limitations and usually include various fees and service charges.
On average, if an individual can maintain one of these probationary accounts for six months without incident, he can graduate to a more sensible and basic account package that have fewer limitations are more incentives.
A Business Bank Account for Bad Credit
There is such a thing as a specific business account for companies with bad credit. These are usually offered by online banks and used as a stepping block to repair your credit history. Typically, these accounts are nearly identical to other business accounts but have some restrictions and incur higher fees and surcharges.
It is stressed that this should be only a temporary solution that is utilized until your credit history is restored. Many businesses and individuals dislike this approach due to the lack of on-site locations and person-to-person business interactions. Not every business is well-suited to use online banking options and this can make it quite difficult to manage business accounts for an extended period of time.
Ordinarily, once you’ve completed a tour with a bad credit business bank account, you can apply with most any traditional financial institution to advance your business account into good standing.
Second Chance Accounts
These second chance business accounts can be tricky to navigate. Many require a large deposit so that the account is considered secure but only offer a debit card; check writing privileges are suspended and credit card payment processing is not guaranteed.
Before obtaining this type of account, review the terms and conditions; oftentimes, this type of business account will not transfer into a standard account and can cause other difficulties associated with bad credit.
This type of account is particularly useful if you have bad credit but still have an existing relationship with a financial institution. D.B.A., or “doing business as,” accounts are typically used by individuals since these don’t require a tax or employer ID numbers and rely heavily on an individual’s personal information.
Beware of difficulties come tax time since these accounts are also used as personal accounts. Separating business and private transactions can be a long, drawn-out process that results in miss deductions and incomplete business records.
Source by Michelle G Woods