Bad Credit Business Checking

Business Checking Accounts for those with Bad Credit

It wouldn’t be an overreach to consider a business checking account to be the most important thing for any business. If you think about it, every business has to be able to pay bills. Every business has to be able to write checks. The financial aspect of any business is the determinant factor to whether a company stays open or shudders it doors. If a person expects to open a business and stay operational, a business checking account is an absolute necessity.

Now, imagine that you are a business owner or are in the process of opening a business and you have bad credit? It sounds like a possible death sentence for your fledgling business and it could be…but it doesn’t have to be. Having poor credit does not bar you from striking out on your own and trying to start up a business venture. It may make matters a bit more difficult and complicate matters; however, it doesn’t make it impossible.

What is a business owner with bad credit to do? Where does someone looking to open a checking account for their new or existing business go? What are the options of such a business? It is in times like this that the saying, “where there’s a will, there a way,” comes in handy.

First of all, you must expect roadblocks and obstacles in your path. Whether you are a new business or even a thriving organization, obstacles will always arise. It is imperative that you learn to maneuver around these roadblocks on your way to success. Having bad credit is definitely an obstacle in all aspects of your life, whether it is business or personal finances, but having the desire and the proper focus to reach your ultimate goals is essential to staying on course.

Second chance checking accounts are a means that anyone with bad credit can open a business checking account, even if they have bad credit. Reports show that approximately eighty percent of all banks and credit unions in the United States use ChexSystems to check the past history of a potential banking customer. The ChexSystems monitors and reports the past history of a banking customer. For instance if a customer is attempting to open a bank account at a new bank, but they have a past history of misdeeds with their former banks or credit unions, any bank that uses ChexSystems can get a report on the person, and most likely turn away the customer.

Find a Bad Credit Business Checking Account

ChexSystems provides a similar service to banks that credit rating agencies like Experian, TransUnion and Equifax provide to companies. They provide a means that allows banks and credit unions to screen their potential customers’ prior banking history. If a bank or credit union gets a customer that has been writing bad checks at previous banks or credit unions or if they still owe their previous financial institution money…the new bank or credit union can reduce their risk by turning away high risk patrons. Think of it like the CarFax for financial institutions.

For people with damaged credit, trying to open a business checking account, there is still hope. Hope comes in the form of second chance business checking accounts and secured checking accounts. Hope comes in the form that there are banks and credit unions that are willing to take a risk on you. These financial institutions are aware of your past banking history and they know that you are anything but the ideal customer. They know that you messed up in the past, but they are willing to give you a second chance.

This second chance that is offered to those with bad credit is not out of the goodness of their hearts. You will have to pay more services that are utilized. You will be required to open your account with a higher minimum opening amount. The bank may not allow you certain features or services from your account at the onset. However, none of it should matter. When you open a bad credit business checking account, you are essentially on probation. You’ve messed up and are being given a second chance. You have to prove yourself. Once you’ve done your time and built up trust again, more and more options and services related to your business checking will become available to you. It is at that time that you will be upgraded from a bad credit business checking account to simply…business checking account.

Having bad credit is sends a negative message to anyone that you are trying to do business with. It tells your suppliers, banks and everyone that they have to be willing to incur a certain level of risk if they choose to do business with you. That is not the type of message anyone wants to send to someone that they are trying to work with. This makes it imperative for you to build up your credit as quickly as possible.

If you are setting up a business and you do not have a partner, any loans applications or credit applications will have to be based on your credit history. If you have a sole proprietorship, creditors and suppliers are still going to use your personal credit history as a way to decided your creditworthiness and determine whether or not to do business with you.

Try setting up your business as a corporation or an LLC in order to establish a business identity separate from your personal identity. Secondly, apply for a federal employment identification number (EIN). Once you have all of the documents necessary to validate that your business, then you should go to a bank and open a business checking account under the legal name of your business. You should also set up a phone line dedicated strictly to your business. These are things that help distinguish your business as a legal entity.

Once you’ve done that you can go about building your business credit history. Keep in mind that even if  you have completed most of the steps above, a bank can still deny you a business checking account, because since your business does not yet have a credit history, your personal credit history, since you are the face of the company, will be used when applying for business checking accounts, loans, etc. With a tougher banking policy in place, you may still be denied a business checking account…due to your bad personal credit.  In extreme cases, you may actually have to work on a cash basis with all of your suppliers until you are able to build up your credit history.

The credit agency, Experian, gives the following tips on how to build your business credit:

• Check your business credit report regularly and verify that the information in it is accurate and up-to-date.
• Establish business credit with companies that report trades. Remember, not all business creditors report their trade information.
• Pay your creditors on time. Historical payment behavior with previous creditors plays a major role in calculating your business credit score.
• These steps can help you begin to build your business credit and once you’ve done that, you will be able to open a business checking account with the bank of your choice.