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Business Bank Account Opening

Overcoming Common Challenges in Business Bank Account Opening: A Strategic Guide

Opening a business bank account marks a crucial point for any new business venture. However, business owners often run into challenges that can tamp down or complicate this important step. This guide highlights the most common challenges of opening a business bank account, as well as ideas to successfully navigate them.

Challenge 1: Increased Due Diligence

Banks have applied much higher scrutiny as a part of the process to open a business bank account in today’s regulatory environment.

Strategic Responses:

  • Prepare a comprehensive business plan so that you can clearly convey your business model and revenues
  • Have an ownership structure that is transparent and may be verified
  • Anticipate additional questions concerning your customers and transaction activity
  • Be prepared to answer questions about your business operations, particularly if you are in a higher risk industry

Challenge 2: Industry Limitations

Some industries will have more difficulty opening a business bank account due to perceived risks or issues on a regulatory basis.

Strategic Responses:

  • Research banks that do, in fact, service your industry vertical
  • Consider a specialized financial institution that has experience and knowledge of your industry vertical
  • Prepare enhanced supporting documentation concerning your compliance protocols
  • Obtain references from businesses in the industry that have successfully completed the business banking account opening process

Challenge 3: Issues with Digital Identification Verification

In the rise of opening accounts with a business bank online platform, digital identification verification issues can occur.

Strategic Solutions:

Ensure:

  • All signatories and directors have current and valid identification documents
  • Use the best scanning equipment available to process digital documents
  • Verify that your business address and contact information match on all documents
  • In situations where digital modalities consistently present challenges, consider verifying in-person

Challenge 4: Minimum Balance and Fee Requirements

Many entrepreneurs do not expect the minimum balance requirements and the diverse fee structures that are common to be applied when opening a business bank account.

Strategic Solutions:

  • Analyze fee structures of banks within the same marketplace
  • Negotiate for fee waivers relative to expected volumes of transaction or deposits
  • Consider a digital-first or digital-only bank, as they tend to have the lowest minimum balance requirements
  • Ask about introductory offers specifically for new businesses

Challenge 5: Cross-Border Banking Complexities

When professionals operate internationally, the complexity of opening a business bank account is augmented.

Strategic Solutions:

  • Consider an international bank that has brick-and-mortar presence in your key markets
  • Ask about multi-currency accounts while opening the business bank account
  • Find out what information your financial institution requires regarding FATCA, CRS, and other requirements at least a few weeks before opening
  • Make sure to have rapport with a banking officer that specializes in international business

Challenge 6: Incomplete Documentation

Few common causes of problems with business bank account opening are caused by incomplete paperwork and documents.

Strategic Solutions:

  • Prepare a complete checklist based on your particular business structure
  • Have someone with specific legal counsel review your document package before submission
  • Maintain complete digital and physical copies of corporate documents
  • Have biographical and financial information prepared for each substantial shareholder

Challenge 7: Approval Delays

Even when perfectly prepared to open a business bank account, the time it takes could be longer than expected.

Strategic Solutions:

  • Start the process early, even if your bank account doesn’t need to be operational
  • Follow-up in a regular manner but with respect
  • Consider the benefits of a banking relationship manager who will have more internal voice
  • Have backup plans on how you will manage without the approved bank account

Challenge 8: Changing Regulatory Environment

Regulatory proposals and developments impact the process significantly, and they increase or decrease the challenges.

Strategic Solutions:

  • Follow the news cycle & develop conversations within your financial institution
  • Consider financial compliance experts for complex applications
  • Build rapport with more than one bank
  • Be prepared to adapt as regulatory environments change

Conclusion

There are significant challenges that come with opening business bank accounts, but your preparation increases the chance of success in the process. Entrepreneurs can improve on how to manage the often convoluted process by thinking through some of the stated challenges. A solid business banking relationship can be established to set the stage for future banking needs.

Pro Tip: Consider hiring financial services professionals who specialize in opening business bank accounts, specifically for your line of work (and your size). Their expertise can make navigating the process more successful as you, the entrepreneur(s), move through what is becoming an increasingly complex banking environment, saving you valuable time and resources.

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