You don’t need us to tell you that good credit is like gold dust when it comes to starting and growing a business.

A healthy credit profile provides you with the key to so many opportunities that an entrepreneur with poor credit wouldn’t necessarily be exposed to. This includes things like access to loans and funding – vital sources of investment for ventures of all shapes and sizes, and particularly those trying to get off the ground.

However, not everybody is fortunate enough to have good credit on their side and this could be down to a whole host of reasons or circumstances. That said, bad credit doesn’t disqualify somebody from business ownership. It just means they might end up experiencing a few more stumbling blocks along the road to success.

One of the biggest hurdles a business owner with bad credit can often face is trying to open a business bank account. In this article, we share our advice on what to do if you find yourself navigating this tricky situation.

Can you be self-employed but only work for a single client?

Yes, even if you have a weak credit profile or poor credit history, you are still able to open a business bank account. It just won’t be quite as straightforward as if you had good credit on your side.

Although it isn’t always the case, banks can refuse to allow you to open a business account with them if you have poor credit. Some of the most common reasons for building a bad credit profile include bankruptcy and CCJs (County Court Judgments).

It’s worth noting here that when we talk about bad credit, we’re referring to either business or personal credit. If you’re aware of existing or historical credit issues in either of these areas and you’re looking to open a new business account, finding the right support is going to be critical.

Do you need a credit check to open a business bank account?

This will vary from one bank to another. Some might not require a credit check whilst others will make this a mandatory part of the process.

As a general rule, high street banks are more likely to require a credit check for those looking to open a business account than digital banks such as Starling and Tide. However, some high street banks also offer free or basic accounts that don’t take your credit score into consideration.

Some banks may also want to check for any other potential indicators. This includes things like being responsible for bounced cheques, letting previous accounts go overdrawn, having outstanding fees or credit balances, or involvement in fraudulent activity.

Things you’ll need when opening a business account include the following, although, again, this can vary from bank to bank:

• Proof of address, such as a mortgage statement (and that’s a whole
  other topic for freelancers), utility bill, council tax bill, or bank statement.
• Business details, including full address
• Companies House registration number, if you operate as a limited company
• Details of the people in your business who have responsibility
• Passport
• Driving licence
• EU identity card (where applicable)

We also recommend ensuring you have one other important business document to hand, and that’s an up to date, detailed business plan. In most cases the bank won’t ask for this unless you’re opening an account which has a credit facility, but a business plan is such a useful document regardless!

From the bank’s point of view, your business plan explains how you plan to make money and what your sales forecasts look like. This will also bolster the validity of your business and its financial future.

Ways to improve your credit score to benefit your business

Once you’ve succeeded in opening a business bank account despite having bad credit, it can be tempting to count your chickens and just feel glad that you’ve overcome the hurdle. However, if your credit score is low and you’re hoping to grow a successful business, improving your credit should be high on your list of priorities.

It’s important to not only start building up your business credit score, but to also continue improving the health of your personal credit too. While your business credit and bank account are in their infancy, your personal credit will likely be used as a form of security. It’s important to nurture it continuously.

Below are some of the most effective ways to boost your credit score and stand your business in the best financial stead.

Don’t let debt pile up

Pay your bills on time and don’t let any outstanding payments go overdue. This really is the most simple and effective way to keep your credit in check, which applies to both your business and personal credit scores.

Keep your business and personal finances separate

Once you’ve got your business bank account set up, ensure that you keep your business and personal finances separate.

Apply for a business credit card

You could also consider applying for a credit card through your business account to start building up your business credit that way. If your credit history is particularly unstable, you could opt for a secured credit card. This requires a deposit of money into the account to be held by the lender for security.

If you have poor personal credit, we wouldn’t recommend applying for a personal credit card.

Make sure there is money in your accounts

Avoid letting your bank accounts go overdrawn and make sure to stay within any approved overdraft limits.

Lean on your suppliers for support

If you have strong, longstanding relationships with suppliers who you regularly pay on time, you could consider asking them to share feedback and payment data with credit reference agencies.

Monitor and manage your finances

Making sure your bookkeeping is up to date is crucial for every business, and it can help you spot any developing issues and take early action too.

Hopefully you’re now feeling more confident about how to boost your credit score and what you can do to improve your chances of opening a business bank account – even with poor credit.

Head over to our freelancer information hub for more guides, tips, and advice.