This can make it far more challenging to open a business bank account. However, there are options available to you, as we explain. This guide is for those looking for a business current account – we have a separate guide on opening a consumer bank account after an IVA.
Opening a business bank account that doesn’t require a credit check
Because an IVA negatively affects your credit score, it’s worth looking for a business bank account that doesn’t require a credit check. That way, your application is more likely to be accepted.
Challenger banks such as Monese and Monzo also offer accounts with no hard credit check, as long as you’re not applying for an overdraft.
You can usually open these accounts quickly via the provider’s app, but it’s important to check eligibility requirements to ensure your business type is accepted. Some plans also charge monthly fees and keep in mind that if your account is managed via an app, you won’t have a bank branch to pop into. Not all accounts let you deposit cash either.
However, many of these accounts connect to accounting software and include invoicing and budgeting tools to make life a little easier.
Opening a basic bank account from a high street bank
If you have poor credit, you might be able to get a basic, everyday business bank account with certain high street banks. These can be used for general banking transactions, but there will be limited perks with this type of account.
Because of your poor credit history, you won’t be given an overdraft and you won’t qualify for a business credit card. But a basic account could tide you over until your credit score has started to improve.
It’s best to contact your local bank branches to find out whether they can help you.
How an IVA can impact getting a business bank account
If you have an IVA, this shows you’ve had problems managing your money in the past. As a result, providers may be more reluctant to let you open a business bank account.
As we’ve mentioned, an IVA can have a long-term negative impact on your credit score. If you’re a sole trader, you and your business are one and the same. This means banks will always look at your personal credit score when you apply for a business bank account.
If you’re a limited company, your personal and business finances are separate, which means banks will first look at your business credit score – which won’t be affected if you have a personal IVA.
However, if you’re a director of your limited company, many banks will look at your personal credit score as well. This will also be the case if your business is new as you won’t have much of a business credit history.
This can reduce the number of business bank accounts you’ll be able to apply for, and those you do get accepted for are unlikely to come with an overdraft.
Alternative options
If you’re struggling to get accepted for the business accounts mentioned above, you could consider applying for a prepaid business card. No credit check is carried out when you apply for one of these cards, so you won’t need to worry about poor credit.
What’s more, these cards can be ideal for budgeting as you need to load up your card in advance and can then only spend what’s on it. You can often give cards to your employees, and they can be a great way to prevent your employees from overspending.
The drawback is you won’t be able to set up standing orders or direct debits on your account and there’s no overdraft facility either.
How to manage your existing business bank account
If you have debts such as an overdraft or credit card with your existing bank and these are included in your IVA, it’s usually best to open a new business bank account with another provider. That’s because your existing bank could freeze your business account or take funds from it to pay off your debts.
This also applies if you have debts with any providers in the same banking group – for example, if you have a debt with HSBC and a bank account with First Direct.
If you already have a business bank account and this isn’t linked to any of your creditors, you don’t necessarily need to open a new one. However, if you have an overdraft, it’s best to stay out of it, and always make sure you pay your bills on time.
Bottom line
If you have an IVA, it can be harder to open a new business bank account, but it’s not impossible. The key is to compare your options carefully with both challenger banks and high street banks to see what works best for you. When comparing accounts, consider factors such as fees, eligibility requirements and account management before you apply.
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Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio
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