Do You Need Good Credit to Open a Business Bank Account?

The first thing on a new business owner’s to-do list should be opening a business bank account. An account in your company’s name provides a separation between personal and business finances. It also establishes legitimacy in the eyes of potential customers and creditors.

Most people expect lenders to scrutinize their credit history during the loan application process. Yet what about when you open a business savings or checking account?

Bankers don’t necessarily demand good FICO scores to open a business bank account. However, poor scores could bar you from certain credit-based banking services like overdraft protection. 

Separating Business Credit from Personal Credit

When discussing how credit history impacts business types of accounts, it’s vital first to understand the distinction between business and personal credit. Your brand-new business has no credit history of its own. Therefore, a business banking account application will trigger inquiries into your personal financial history — primarily if you operate as a sole proprietor. 

As you build your business credit profile, bankers begin relying less on your consumer scores and more on your company’s track record. Maintaining separate bank accounts and credit reports means you can: 

• Avoid adverse reporting on your personal credit profile.
• Preserve the way your business score and credit rating look to potential lenders. 
• Make bookkeeping easier for you or your CPA when it’s time to pay your business taxes.
• Protect yourself from personal liability. 
• Protect your personal assets.
• Improve your business financing and credit opportunities.

Opening a business checking account is the first step toward separating your personal and business credit and finances. It will give you a central location to pay your bills and business expenses and help you streamline your bookkeeping.

What Are Bankers Looking For?

When you submit your application for a commercial bank account, the banker will look at multiple sources of information before approving your request. This can include your ChexSystems profile data and credit history.

ChexSystems and Your Banking History

ChexSystems is a consumer reporting agency that collects data from banks regarding their customers’ activity. Its process is similar to the way credit bureaus collect information from creditors. Instead of late payments and debt to limit ratios, however, ChexSystems reports on your history of bounced checks and overdraft fees.

If a banker sees a pattern of poor bank account management in your ChexSystems profile, they may deny your business account application. At that point, you could request a free copy of your ChexSystems report to see the data for yourself. This could help clarify the reason behind the denial. 

If you spot incorrect information on your report, you can file a dispute to have that data removed. Once you resolve any outstanding issues or bank debts, you’ll be clear to open a business bank account.

Credit Scores and Reports

Banks and credit unions don’t typically run hard inquiries with credit reporting agencies when evaluating your checking account application. However, they’ll probably perform a soft pull to check out your business and personal credit scores. This will give your banker a stronger sense of your financial picture. 

Low consumer and business credit scores could limit your access to specific account features. For example, overdraft protection is a standard service that helps you dodge penalties for non-sufficient funds (or sometimes referred to as NSF’s). If your account balance runs low, shortages can be covered by a savings account or a bank line of credit. 

If the bank’s inquiry comes back and deems you uncreditworthy, you may not qualify for overdraft protection or other credit-based features.

The Revenued Business Card and Your Business Bank Account

Though you don’t need a high credit score to open a business bank account, poor credit history and a track record of negative banking activity could limit your options. If you’re concerned about being turned down for a business bank account, shop around for a bank or credit union that doesn’t use ChexSystems.

Once your business bank account is up and running, you could be eligible for a broader range of funding opportunities. This includes the Revenued Business Card which is not a credit card, but instead is a purchase of future receivables utilizing revenue-based financing to provide a prepaid debit card for your business. Despite not being a credit card, the Revenued Business Card can be used for purchases in-store or online similarly to a business credit card. 

In order to qualify for Revenued, a business must have at least $10,000 in monthly sales, an average daily balance of $1,000, and carry a negative balance no more than three days in a month. They must be in business for at least 6 months and maintain a separate business bank account. 

Revenued looks at business revenue instead of more traditional factors like a personal credit score or business credit score to determine eligibility. This can make it an excellent option for business owners who have a limited business credit history or a poor or fair personal credit score. 

Although there are no draw fees or interest charges with the Revenued Business Card or Flex Line, Revenued does charge a factor rate which may end up being more expensive than a conventional business bank loan. It’s important to weigh the pros and cons when making any financing decision for your business and if your personal credit score or timing are at the top of your list of deciding factors, then Revenued can still be a great option to consider. 

Learn more today by emailing [email protected] or calling +1-877-662-3489 and see if Revenued is right for you.