What to Do If Your Business Bank Account Application is Rejected?
Starting a business is no small
feat, and securing a business bank account is often a critical step in
establishing financial credibility and streamlining your operations. However,
the unfortunate reality is that business account applications can sometimes be
rejected. A rejection can be disheartening whether it’s due to insufficient documentation, credit issues, or
other factors. If you see that you’re in a
similar scenario, don’t feel gloomy. This guide will walk you through the steps
you can take to address common issues and reapply successfully
1.
Understand the Reasons for Rejection
Before you can effectively address
the issues that led to your application being rejected, it’s crucial to
understand why it happened in the first place. Banks usually provide a reason
for the rejection, which can help guide your next steps. Below are a few
similar reasons for getting a rejection:
- Poor Credit History:
A low credit score or negative credit history for either the business or
its owners can lead to rejection.
- Incomplete Documentation: Missing or incorrectly filled-out forms can delay or
invalidate your application.
- Inconsistent Information: Discrepancies between the information provided in
your application and what the bank has on file can raise red flags.
- Lack of Business History: For new businesses, not having a sufficient track
record can hinder your chances.
- Regulatory Issues:
Non-compliance with local regulations or laws can also result in
rejection.
2.
Check Your AECB Score
One of the first steps you should
take after a rejection is to check your Al Etihad Credit Bureau (AECB) score.
This score reflects the creditworthiness of business partners and owners, and
it’s crucial for banks when considering your application.
Steps
to Check Your AECB Score:
- Request a Credit Report: You can obtain a credit report from the AECB online.
This report will provide insights into your credit history and any
outstanding debts.
- Review for Errors:
Check for inaccuracies in your report. If you find discrepancies, follow
the AECB’s procedure to dispute and rectify these errors.
- Address Bad Credit:
If your credit score is low due to outstanding debts or missed payments,
create a plan to resolve these issues. This might involve negotiating
payment plans with creditors or settling outstanding debts.
- Seek Guidance:
If you're unsure how to improve your credit score, consult with a
financial advisor or a banker who can provide tailored advice.
3.
Review Required Documentation
Incomplete or incorrect
documentation is a common reason for account application rejections. Take the
time to carefully review all mandatory documents.
Key
Documents to Check:
- Business Registration Documents: Ensure that your business is properly registered and
that all necessary licenses are up to date.
- Proof of Address:
Verify that you have submitted the correct proof of business address. It
can commonly have bills related to energy or any rental deeds
(agreement).
- Identification:
Ensure that all owners and partners have provided valid government-issued
identification.
- Financial Statements:
Prepare accurate financial statements, including profit and loss
statements and balance sheets, if applicable.
- Business Plan:
Some banks may require a detailed business plan outlining your operations,
market strategy, and financial forecasts.
Rectifications:
If you find any discrepancies in the
documents you submitted, make the necessary corrections. It might be beneficial
to have a second set of eyes review your documentation to catch any errors you
may have overlooked.
4.
Analyze Business History
If your business has a history,
particularly one that includes financial difficulties, this could negatively
impact your application.
Steps
to Review Business History:
- Check for Cheque Returns: If you have had any returned cheques or dishonored
credit in the past, take steps to resolve these issues with the relevant
parties.
- Review Financial Transactions: Analyze your business's financial behavior over the
last few years. Ensure that you maintain a healthy cash flow and that you’re
not relying excessively on credit.
- Address Negative Events: If there have been significant negative events, such
as bankruptcies or insolvencies, document what led to these issues and
outline how you’ve improved your business practices since then.
5.
Understand Bank Policies
Every bank has its own set of
policies and criteria for approving business accounts. Familiarizing yourself
with these can help you tailor your reapplication.
How
to Understand Bank Policies:
- Research Online:
Many banks publish their business account requirements and policies on
their websites. This can provide insight into what they are looking for in
an application.
- Consult with Your Banker: If you have a relationship with a banker, don’t
hesitate to ask them directly about what led to your rejection and how to
strengthen your application.
- Attend Information Sessions: Some banks hold workshops or information sessions for
business owners. These can be invaluable for understanding the nuances of
their application processes.
6.
Create a Detailed Business Report
A well-prepared business report can
greatly enhance your chances of approval when you reapply.
Components
of a Business Report:
- Executive Summary:
Provide an overview of your business, including its mission and
objectives.
- Market Analysis:
Include research on your target market, competition, and market trends.
- Operational Plan:
Describe how your business operates, including processes and resources
needed.
- Financial Projections:
Outline your financial forecasts for the next 1-3 years, including
expected income, expenses, and profitability.
- Risk Analysis:
Identify potential risks to your business and outline strategies for
mitigating these risks.
Tips
for Creating the Report:
- Be Thorough:
Include as much relevant information as possible without overwhelming the
reader.
- Use Visuals:
Graphs, charts, and infographics can make complex data more digestible.
- Seek Feedback:
Have trusted colleagues or mentors review your report and provide
feedback.
7.
Prepare a Cover Letter
When you reapply, consider including
a cover letter that addresses the previous rejection. This can demonstrate your
commitment to improving your application and willingness to comply with the
bank’s requirements.
What
to Include in the Cover Letter:
- Acknowledgment of Rejection: Briefly mention that you received a rejection and
express your appreciation for the feedback.
- Summary of Changes:
highlight the points that you could list down to deliver the reasons for
getting rejected in your application.
- Commitment to Compliance: Emphasize your commitment to adhering to the bank’s
policies and guidelines.
8. Reapply with Confidence
After you’ve taken the necessary
steps to rectify any issues, it’s time to reapply.
Tips
for Reapplying:
- Timing:
Consider the timing of your reapplication. Give ample time to the
department of the selected bank to go through in a detailed manner your last application request to make sure everything comes under SOP’s policies.
- Maintain Communication: Keep in touch with your banker throughout the
process. Open lines of communication can help ensure you are on the right
track.
- Stay Positive:
being rejected is a bad feeling, keep a confident and upright attitude
with this your chances of getting a positive result will become more
imminent.
9.
Explore Alternative Banking Options
If you face repeated rejections from
traditional banks, consider exploring alternative banking options. Many fintech
companies and online banks offer business accounts with different eligibility
criteria.
Alternative
Options to Consider:
- Credit Bauru:
The bodies that have lending credibility and are more open to approvals
than an old-style banking institute.
- Online Banks:
Fintech companies may provide more lenient application processes and can
be more accommodating to startups.
- Niche Banks:
Most financial institutes uniquely operate for a few selected types
of business activities, and have a list of banks that offer your business leverage.
10.
Seek Professional Guidance
If you’re struggling to navigate the process on your own, consider seeking professional guidance. Financial advisors, accountants, or business consultants can provide valuable insights and help you strengthen your application.
Benefits
of Professional Guidance:
- Expertise:
Professionals can help you understand complex banking requirements and
assist in preparing necessary documents.
- Networking:
They may have contacts in the banking industry that could provide
additional support or insight.
- Tailored Advice:
A professional can give you tailored advice specific to your business and
situation.
Conclusion
Having your business account
application rejected can be a setback, but it’s essential to view it as an
opportunity for improvement rather than a failure. By thoroughly understanding
the reasons for rejection, addressing any issues, and preparing a strong
reapplication, you can increase your chances of success. Whether it’s improving
your credit score, gathering the right documentation, or seeking professional
help, taking proactive steps will help pave the way for your business’s
financial success. With determination and the right strategies, you’ll be well
on your way to securing that essential business account.
If you're a business
owner, remember to embrace the journey. The skills and experiences you gain
along the way of opening a business account can be very useful in the future,
and to seek better guidance for getting your company account in a bank up and
running reach out to the author of this blog: Wasiq Suhail
Contact details below:
Email: abz.wasiq@gmail.com
Phone Number: +971 50 505 3319
WhatsApp: +971 55 394 2948