Once a contractor has shopped around to find the most suitable business bank account, they have to actually go through the often time-consuming application process before they can open it and use it.
Just like with a personal bank account, a business bank account for contractors requires them to first complete an application form, usually online, in branch, or over the phone. A bank will then ask for more information and documents, such as proof of address and ID, and other background checks – it’s usually possible to do this face to face at a branch, or through the post, and some newer banks even allow you to do it online.
Make sure you check carefully that you give them all the right documents, or there’ll likely be delays to opening your business bank account.
What will a bank ask you when you apply for a business account?
Banks will ask a contractor the same questions they’ll ask about any type of business, such as their business’ name and registered address (this will probably be the contractor’s home address), what service your business provides as a contractor, when the business was started, an estimate of turnover for the first year or so in business, and the legal status of the business, which will most likely be a limited company for contractors. They’ll also want to know if you require any funding to get your business going.
But you won’t only be asked about your business. A bank will still want to ask you plenty of more personal questions even when you are opening a business account, but none of these questions will likely surprise you. You’ll need to give them information such as your address and how long you’ve been living there, your nationality and birthdate, details of your personal bank account, and other financial information.
Completing an application for a business bank account
While, as a contractor, you probably want to start working as soon as possible, all the information a bank requires to give them before they give you a business bank account does mean it will take a little longer than you’d like. However, it’s not that long, and giving them the information and proof of ID can be sped up a little by going into your local branch.
Opening a business bank account with poor credit history
Most banks will refuse contractors a business bank account if they have a poor credit history or don’t have a trading history, even if that contractor already has a personal account at that bank. Banks can be very strict with this, so even if a contractor has a pretty good credit score, it might still not be good enough for the bank to give you a business account.
Anti-money laundering regulations
We said at the start that opening a business bank account can take a while for contractors. This is partly because of anti-money laundering regulations in the UK, which require banks to get new customers to prove their identity and address before a bank account can be opened and used – it’s not a hugely difficult thing to do, but it does mean that contractors need to factor this time in when they start their business as it might delay when they can start working.
Shoaib Aslam is the co-founder of Pearl Chartered Accountants, a UK-based chartered accountancy firm that has multiple locations across London. They are experts in helping startups and established businesses with all aspects of growth, strategy, scaling up, accounting and tax planning.