Bad credit makes even simple tasks such as opening a business current account more difficult. If you have a new business, the business itself may not have enough financial history to stand on its own. Banks may require you to back up the business financially with your own credit and assets. If your credit is poor, you may find the process even more difficult, but there are ways around it.
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Incorporate your business. This establishes your business with its own tax identification number and removes all business assets from your personal balance statement, protecting them from your creditors.
Contact the bank where you have your personal accounts. Speak with a customer service representative about opening a business account. Many banks will work with customers who have an established current account already. You may be in debt, but if you haven't had checks returned for "insufficient funds," you have a greater chance of getting a new business account.
Agree to maintain a high minimum balance or pledge a company asset as collateral on the account. Remember, this is a current account and not a line of credit, but if the flux of capital is great on a regular basis for inventory or supply purchases, your bank may want some assurances.
Shop around. There are many banks that work with start-ups that have no credit or with people who have poor credit.
Tips and warnings
- Keep a positive balance in your business current account once it is established. The bank can close the account if you have one too many insufficient-funds claims.
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