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Fortunately, opening a business bank account with bad credit is possible.
Secured Business Accounts
Many banks offer checking accounts for new businesses or those with bad credit with a large deposit. This makes the account a secured type. Typically, the bank will request a deposit of at least $500. Once you keep your account in good standing for a year or so, the bank will convert this over to a standard business checking account. Often, an advantage to this is that you can still set up merchant services if you need things like credit card processing. The downside is that you may end up paying higher fees for these types of accounts and have limited check writing abilities.
Checkless Accounts
With a simple Internet search, you can often find banks that specialize in second chance accounts, which are available for business accounts. With such an account, you are generally given a debit card and no check writing privileges. Before you set up one of these accounts, make sure you check on the terms. Often, a second chance account will not convert to a standard account, and it may not offer credit card processing for your business.
DBA Accounts
If you have bad credit but already have an existing relationship with a bank, look into a DBA, or a “doing business as,” account. These accounts rely more heavily on your personal information than your business standing. They are used most often by independent contractors and sole proprietors, as they don’t require a tax ID or employer ID number. They are based on your personal Social Security number. The drawback to these accounts is that, at tax time, it can be difficult to itemize your expenses because you can use these as personal accounts too.
Internet Credit Processors
There are a host of sites devoted to online transactions. Sites such as PayPal will give you the benefit of accepting credit or debit card payments and will offer you a debit card with your account as long as you can verify your identity. These sites don’t generally run a credit report to set up the account. You will receive tax information at the end of each year so you can file your earnings with the IRS. The downsides to these types of accounts are that you will have no check writing abilities and the sites may limit the types of products you can sell. You should also expect to pay higher fees per transaction for all cards processed through their servers.
Secured Business Accounts
Many banks offer checking accounts for new businesses or those with bad credit with a large deposit. This makes the account a secured type. Typically, the bank will request a deposit of at least $500. Once you keep your account in good standing for a year or so, the bank will convert this over to a standard business checking account. Often, an advantage to this is that you can still set up merchant services if you need things like credit card processing. The downside is that you may end up paying higher fees for these types of accounts and have limited check writing abilities.
Checkless Accounts
With a simple Internet search, you can often find banks that specialize in second chance accounts, which are available for business accounts. With such an account, you are generally given a debit card and no check writing privileges. Before you set up one of these accounts, make sure you check on the terms. Often, a second chance account will not convert to a standard account, and it may not offer credit card processing for your business.
DBA Accounts
If you have bad credit but already have an existing relationship with a bank, look into a DBA, or a “doing business as,” account. These accounts rely more heavily on your personal information than your business standing. They are used most often by independent contractors and sole proprietors, as they don’t require a tax ID or employer ID number. They are based on your personal Social Security number. The drawback to these accounts is that, at tax time, it can be difficult to itemize your expenses because you can use these as personal accounts too.
Internet Credit Processors
There are a host of sites devoted to online transactions. Sites such as PayPal will give you the benefit of accepting credit or debit card payments and will offer you a debit card with your account as long as you can verify your identity. These sites don’t generally run a credit report to set up the account. You will receive tax information at the end of each year so you can file your earnings with the IRS. The downsides to these types of accounts are that you will have no check writing abilities and the sites may limit the types of products you can sell. You should also expect to pay higher fees per transaction for all cards processed through their servers.
