Why It Is So Difficult to Open a Business Account in the UK – and What’s the Alternative?

Every company, small or large, that plans to operate in the UK market needs a local business account, yet opening one can be a complex and frustrating task. There are many hoops to jump through and a real risk of rejection for businesses with complex shareholder structures or directors who do not live and work in the UK.

So what are your options if you don’t meet the bank’s criteria? Let’s take a look.

Do we know you?

You’d think in the era of internet banking that opening a UK business account would be as simple as filling in an online application and having your account verified in just a few days. But most businesses have the opposite experience.

Banks are risk averse and require a lot of documentation to open a business account. Even if your business is UK-citizen owned and run, opening a bank account usually means providing:

        •       Your company’s Certificate of Incorporation

        •       Proof of your registered office address in the UK

        •       Your company’s Memorandum and Articles of Association

        •       Proof of identity for major shareholders and directors

        •       Shareholder details

        •       A business plan

        •       Trading records and financial history, depending on the bank.

This is a lot to ask from businesses, particularly start-ups. But it’s a necessary evil if you want to open a business bank account in the UK.

Overseas entities need much more paperwork

The minute you have foreign ownership and overseas directors, things get much more complicated. All banks have to comply with anti-money Laundering (AML) regulations and Know Your Customer (KYC) requirements to prevent terrorism financing, money laundering and other fraud schemes. Know Your Customer requires biometric verification, ID checks and document verification for each director and everyone who owns or controls the business. If your business includes offshore entities, the bank will request a company structure chart and you may be asked to provide a source of wealth for key controllers.

Get through the extensive checks and you may face another hurdle. It sounds counterintuitive, but if you arrive in the country with your financing already arranged – which most foreign companies do – then you actually become less attractive to the banks. That’s because you’re not looking to borrow money, and banks make the majority of their profits from lending. Without a loan on the books, the only win for the bank would be to earn small amounts in foreign exchange, which is economically unappealing.

Long story short: if you’re an overseas entity or an unknown entity with only a limited track record in the UK, there’s significantly more due diligence to perform before the bank can trust you. That means a laundry list of requirements and an application process that’s long, arduous and frustrating.

So what’s the alternative?

Time is money in business and getting tangled up in banking red tape is the last thing you want to do. That’s why our business accounts are easy to open, with no hidden fees or complex terms and conditions. The account will be in your business name and you can receive, hold and exchange money in multiple currencies you need to run your business and develop that all-important trading record in the UK.

Who is eligible?

Unlike traditional banks, Luminary is much more flexible when it comes to who we can offer a business account to. We don’t require extensive documentation or a long trading history and we can approve businesses with overseas directions and complex shareholder structures that meet our eligibility criteria.

So if you’re looking for an alternative to a business bank account, Luminary is a solution for you. To get started, download our app and apply in minutes. Even if your business is complex, you’ll get a response within just 48 hours – far quicker than any high street bank!

APPLY NOW  https://app.luminaryinc.com/