Overcoming Credit Challenges in Business Banking

Banking with a less-than-perfect credit score can be a challenge, but there are still options available to you. If you’re an aspiring business owner who has been told bad credit will be a barrier for you, it’s not the end of the road. Whether you want to open an account for a new business or switch from your current bank, this guide will tell you everything you need to know.

Check Your Credit Score

Before applying for a new business bank account, your first port of call should always be a credit checker tool. Credit scoring is commonly used in the UK and abroad to evaluate your financial credentials based on your credit history. It takes into account financial activities such as loan applications, payment records, and credit usage.

Credit scores apply to both individuals and businesses, with the verdict placing you on the positive or negative end of the scale. A higher credit score is reached by demonstrating an upstanding credit history, increasing your likelihood of finance approval. You can check your Experian Business Credit Score here.

Assess Your Options

Has your credit check returned a less-than-ideal result? Don’t fret! There are solutions for British businesses with bad credit that many people are unaware of. Although this will limit your options, numerous finance providers in the UK don’t include a credit check in their application process.

Some of these providers are alternatives to established high-street banks. However, they are still regulated by the Financial Conduct Authority (FCA) so you can rest assured that you’re dealing with a reputable company. These providers offer debit cards, online banking services, and sometimes overdrafts.

We did some research for you and found some of the best options currently available to UK businesses.

Please note that these offers were available as of August 2023.

CardOneMoney Business Account

• No monthly fees for three months

• £12.50 per month thereafter

• 0% interest

• No credit facility

ANNA Money Business Account

• No monthly fees

• 0% interest

• Loan facility subject to terms

• Get 1% cashback on purchases

Cashplus Business Go Bank Account

• No monthly fees

• 0% interest

• Overdraft available upon invitation

Countingup Business Account

• No monthly fees for three months

• £3.00 per month thereafter

• No credit facility

Find out more about these bank accounts, backed up by the Current Account Switch Guarantee, and take advantage of the offers by clicking the button below.

What is the Current Account Switch Guarantee?

The Current Account Switch Guarantee does what it says on the tin. It was introduced to let you switch your current account from one bank or building society to the next in a simple, secure, and stress-free way. This also guarantees that the switch won’t take any longer than seven working days, so you'll minimise your business’s cash flow disruption.

You can agree on your switch date with your current bank account provider, and there’s no need to worry about moving your Direct Debits and standing orders. Your balance will move over safely, and any payments mistakenly sent to your previous account will be redirected automatically.

How to Improve Your Credit Score

Even if you manage to secure a brilliant bank account despite a low credit score, it’s still advisable to start bringing that number up as soon as possible. Credit scoring is never an exact science. It is often measured in slightly different ways, and it isn’t always clear what the most significant contributing factors are. However, there are a few things you can focus on that will typically positively impact your rating.

Paying your bills on time, including credit card and loan repayments, is always a good place to start. Regularly missing payment dates won’t stand you in good stead with banks or lenders. If you choose to set up Direct Debits, make sure there are always sufficient funds in the relevant account to prevent automatic withdrawals from bouncing. This is a vitally important consideration because whether you’re fulfilling these payments will swing your credit score.

If you have outstanding debts, it’s best to pay them off as soon as you’re realistically able to. Increase your repayment amounts if possible, but again, ensure you don’t miss any dates. On the same lines, it’s beneficial to maintain a healthy mix of credit sources between the likes of loans, mortgages, and cards.

Making several new credit applications at once can be a red flag to anyone checking your history, so this is something to avoid. It’s equally advisable to avoid utilising more than 30% of your available credit. If you regularly pass this mark, it’s better to ask your bank to increase your credit limit.

Last but not least, you can look into securing a credit builder loan. This type of loan is for individuals or businesses with poor or no credit in mind. In this arrangement, you will take on a small, manageable amount of debt you can repay regularly to demonstrate that you’re a reliable borrower.

Can I Get a Business Bank Account with Bad Credit?

Securing a business bank account with bad credit will undoubtedly pose challenges, but it's not impossible. You can overcome these challenges by researching your options, choosing the right account for your business, and demonstrating responsible behaviour.

At BusinessComparison, we have a track record of helping people with a poor credit history find the right business bank account for them.

Sam White