How long does it take to open a business bank account?

If you’re creating a limited company, opening a business bank account is a legal requirement — and while founding or expanding a business is an exciting time, getting a payment account set up has its challenges.

Across financial service providers, it can take anywhere from 2 hours to several months to get a business account set up, with “challenger” banks usually proving the most time-efficient. Yet while it can be a straightforward process, many entrepreneurs struggle to get their application approved quickly, leading to operational delays, a whole lot of paperwork and even financial loss.

In this instalment of Muloot Explains, we’ll run through the key reasons for delays opening business bank accounts, and how to optimise your application to avoid them.

Eligibility criteria for opening a business account

To open a business bank account, you’ll have to meet a set of eligibility criteria. While these are broadly similar across the industry, there can be some variation between financial services providers, which could make all the difference to the outcome of your application.

Here are some of the standard eligibility criteria you’re likely to encounter as an applicant:

• Must be 18 years of age or older (some providers will accept 16+)
• Must be the owner or director of the business
• Must be registered to pay income or corporation tax in the UK
• Must have an active status on Companies House
• Must have at least one PSC (Person of Significant Control) registered on Companies House
• Must be able to provide the relevant personal identification and business registration documents

Banks are also at liberty to have their own rules and practices about who they will and won’t offer a business account to. This usually means that businesses in higher-risk industries are less likely to get their application approved. For instance, Monzo lists that it won’t currently accept applications from businesses providing dating services, tattoo or nail parlours, or gambling and betting services.

Common reasons for delays

If you’ve submitted an application for a business account and you’re waiting for approval, there are a number of different things that could be holding the decision up. Take a look at some of the most common reasons for delays below:

• You’ve provided incorrect or incomplete documents.

  One empty box could hold up the whole process, so be sure to check and double check you’ve provided all the information and identification required.

• Your business is newly registered.

  If you’ve only just registered your firm with Companies House, it’s unlikely to have much of a financial record yet — which can raise the alarm for some banks.

• Your business has partners in sanctioned countries.

  If you don’t disclose business partners in sanctioned countries up front, they’ll be discovered when banks carry out Know Your Business (KYB) checks during the due diligence process. To ensure they’re not transacting in sanctioned regions, many banks will avoid providing accounts to businesses with connections to high-risk locations.

• Your business is in a high-risk or low regulation industry.

  Many banks feel that companies operating in industries like betting and gaming, defence or even CBD products pose too much of a risk to offer an account to.

• Your business has no local presence.

  If your business isn’t registered in the UK, or doesn’t have any real presence in the UK market — like a physical location — this might count against you in your application, as your commitment to, and familiarity with, local regulation could be questioned.

• Your company directors live outside the UK.

  While discrimination on the grounds of nationality is illegal, some banks still withhold business accounts from companies with directors or beneficiaries that are non-residents, or have foreign passports.

• Your business has a complex ownership structure.

  Some companies have a multi-layered ownership structure, with a number of partners, holding companies, corporate officers, Persons of Significant Control (PSCs) and shareholders. In this instance, it can be difficult for banks to clearly establish who the beneficial owners are — so your firm might not pass due diligence.

Opening a business account with Muloot

At Muloot, we pride ourselves on the level of expertise held by our in-house experts, so when it comes to reviewing business account applications, our decision-making process is backed by decades of experience.

This advanced human insight is what enables us to make the more complex calls — and accept applications from businesses that other financial service providers might have turned down, due to non-standard circumstances.

To find out more about our ethos, take a look at the Muloot manifesto, or get in touch with our team to join us today.