If you’re researching for reasons why “the bank closed my business account”, you’ve come to the right place. And, you’re not alone…
Account closures are a very common occurrence.
So much so that more than half of the business owners that come to us for help opening business bank accounts say they’ve had an account closed in the past.
And, though most banks will follow good practices and explain why the account was closed, this isn’t always the case.
In fact, of our members who said that they experienced a closed bank account:
13% said they received an explanation from the bank on why
87% said that the bank refused to share any details
And almost half of those who didn’t get any details said that when they pressed the bank for an explanation, the bank stopped responding altogether.
Clearly, this is a major issue. And that is why we’ve put together this comprehensive guide on what to do if your bank closes your business account. Read on to learn the reasons why your account may have been closed and the steps you can take to prevent your accounts from being closed in the future.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Why Did the Bank Close My Business Account?
- What Are the Reasons for Closed Business Accounts?
- What Do I Do After the Bank Closes My Business Account?
- How to Prevent From Having My Business Bank Account Closed?
- Frequently Asked Bank Account Closure Questions
- Do You Want Help Opening Bank Accounts?
Why Did the Bank Close My Business Account?
A bank will typically close your business account because it’s been flagged for suspicious activity, but this is not the only possible reason. Read on to find out why a bank may close your business account and what to do if it has.
In this article, we’ll discuss the many reasons why banks decide to close business accounts and what you should do if this happens to you. We’ll also share helpful tips on how to prevent your business bank account from being closed in the first place.
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What Are the Reasons for Closed Business Accounts?
If you’re struggling to determine why your bank closed your bank account you’re not alone.
This unfortunately happens more frequently than you’d expect. And, for a variety of reasons. Including the following…
Reasons Why Banks Close Business Accounts
- Bank suspects illegal activity
- Multiple transactions were made with a high-risk country
- Unusual transactions were made that didn’t match the patterns of your typical day-to-day activity
- Bank requests were ignored on multiple occasions
- You failed to submit supporting transactional documentation
- Bank finds out you provided misleading information when opening the account
- Bank deems your business too high-risk
- Bank flags your transactions with a third party as suspicious
- Your account has racked up overdraft fees
- Bank is in an unstable banking jurisdiction
- And more…
Every bank’s priority is to make money. It’s typically not in its interest to close a profitable client’s accounts. So, if a bank suddenly closes your business account, there has to be a reason.
Probably the most common reason a bank would close your account is that it suspects illegal activity. More specifically, they have flagged a specific transaction with a blacklisted country or a suspicious third party.
If you’re at risk of this happening to you, or it has already happened, you’ll want to know what to do next. Read on as we uncover the specific steps you should take if you find that your bank has closed your account.
What Do I Do After the Bank Closes My Business Account?
You’ve just discovered that your bank closed your business account, is there anything you can do about it?
Well, unfortunately, the chances of you re-opening your business account after the bank closes it is very slim. In fact, it’s nearly impossible for the bank to re-open a closed account.
So, if you suddenly find your bank account closed these are the next steps you should take.
Step 1: Don’t Argue With Bank, Instead Collect Funds
Banks are under no obligation to continue their banking relationship with clients who choose not to follow the bank’s guidelines and regulations. If the bank suspects illegal activity, they have the right to end the banking relationship and close your bank account.
Of course, ideally, banks should handle this process with care and with respect to the Code of Banking Practice. Examining the situation and reviewing the case carefully to ensure they are making the right decision.
Nonetheless, the sad fact is that you’ll never know if that was the case because your bank is not required to explain why they chose to close your account.
In most cases, it’s not worth the time and effort to argue with your bank. Instead, you should focus your efforts on getting your funds from the closed account and moving on to the next step.
Step 2: Update Incoming Payments and Automatic Bill Payments
This next step is very important.
Once you find out that your bank account has been closed, you need to put a stop to all incoming and outgoing payments. And, inform your customers, employees, and/or suppliers that you’re in the process of opening a new business bank account. This way, you can prevent payments from bouncing back and lower the chances of being charged unnecessary fees.
In the meantime, you’ll want to make other arrangements to ensure you don’t miss a bill payment or risk the chances of losing a business sale from a customer.
If you have a backup account, you just need to update the information with your payment processing service. This way, you will face minimal interruption to your business activities.
Now, if you don’t have a backup account, you’ll want to take a look at the next step (and make sure that you have a backup for next time!)
Step 3: Open a New Business Bank Account… Quickly!
Since re-opening a business bank account with your bank is nearly impossible, you’ll need to open a new business bank account as soon as possible.
Of course, doing so can often be challenging, especially if you don’t know where to open an account.
Fortunately, GlobalBanks can help.
When you become a GlobalBanks member, you’ll receive full access to our country and client intelligence reports.
These reports detail the entire account opening process. Including what client groups can open in which jurisdictions, the account opening challenges you’ll need to overcome when applying, and how to successfully open an account in a banking jurisdiction that’s best suited for you and your business.
If you’re interested in learning more about how to become a GlobalBanks member and how our team of experts can help you open a business bank account, click here for more information.
Now, if you don’t ever want to say “the bank closed my bank account” again, read below. We share helpful tips on how to prevent your bank from closing your business account.
How to Prevent From Having My Business Bank Account Closed?
The best way to prevent having your business bank accounts closed is to ensure you’ve chosen the right banking jurisdiction and bank to open accounts with.
How can you make sure that you’re working with the right bank?
Well, before applying to open an account, it’s important to determine whether or not the bank aligns with your banking needs.
Here are some key questions to ask the bank before applying.
Questions to Ask Before Applying to Open a Bank Account For My Business
- Are there any countries that the bank does not associate with?
- Are there any industries the bank does not support?
- Does the bank accept third-party transactions (e.g. Wise)?
- Will the bank consider your transaction activity unusual? (Give them some examples of your transactions)
These are just some questions that can help identify whether the bank you’ve chosen matches your banking needs. Asking these questions ahead of time can significantly help to lower the risk of account closure.
With this in mind, here’s a list of other ways to prevent an account closure from happening…
- Choose a stable banking jurisdiction to open a business bank account in
- Explain unusual transactions in advance
- Advise your bank of an incoming unusual deposit
- Advise your bank if you’re traveling out of the country
- Don’t go a long period of time without making a transaction
Again, it’s always a good idea to have a backup account just in case your primary bank account is closed. This way you won’t have interruptions to your business while you’re figuring out what to do next.
If you’re looking for a new business bank account or a backup account, we can help you find the best accounts out there for you.
This is especially critical for businesses that have a high-risk profile. If you want to make sure that your accounts aren’t closed, it’s not helpful to you, in the long run, to bluff your way through the account opening process.
You’ll have much better luck keeping your accounts open if you find a bank that is open to your business and client profile.
Frequently Asked Bank Account Closure Questions
Below are three of the most common questions we receive from people exploring why the bank closed your business account. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.
What Happens if My Business Bank Account Is Closed?
If your business account is closed, you will no longer be able to access your account. It’s important to contact your financial advisor or account manager to transfer the remaining account balance to another bank account. That said, depending on why your account was closed in the first place, you may not be able to access your funds right away.
Can I Reopen My Business Bank Account?
No, it is highly unlikely the bank will reopen your business bank account. In this case, you will need to apply to open a new business account at a different financial institution.
Can a Bank Close Your Bank Account Without Your Permission?
Yes, a bank can close your account without your permission and without giving you any notice. In fact, banks can close bank accounts for many reasons including bank account inactivity, suspicious account activity with high-risk countries, failure to submit supporting documents, or because of questionable third-party transactions.
Do You Want Help Opening Bank Accounts?
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To learn more about opening accounts with GlobalBanks IQ, just click here now. Or, contact us directly with any questions!
