Does this sound like what happened when you tried to open a bank account for your company?
- – Secured and submitted all the required documents.
- – Had the right people present to sign the papers.
- – Eagerly awaited the green light from the bank.
- – Received a rejection instead.
Before you tear your hair out or get frustrated with the bank, don’t forget that banks are businesses too.
Banks make money by using client deposits (the money its clients hold at the bank in current and savings accounts) to invest in stock, funds and bonds, or loan it out to other customers and charge interest, to make money grow.
They also operate in a highly regulated market and not only have strict rules to protect clients’ money, but are also required to be reasonably able to detect if money they transact with is related to money laundering or terrorism – which is illegal.
So if the bank is saying no, either they don’t see you as good business for them, or you don’t satisfy their checks to meet strict regulatory requirements.
What this means on your end? Below are 5 reasons that we think are most likely to have resulted in the “no”.
You filled out the application form wrong
Sometimes it’s the simplest things that count. The forms are lengthy and kind of tedious. Did you lose concentration, enter wrong information or miss sections? They’re not going to say yes unless they think you will be a good client for them, and lack of or inaccurate information will leave gaps in their assessment.
Information relating to your business operations or company structure triggered a rejection
Banks will access your company details on ACRA by reviewing your bizfile. Here are a few areas of concern to them:
- Is your business complex and highly regulated in nature that may be high risk in terms of money laundering or terrorism risk? Maybe they think you’re high risk.
- Is your company part of a complex group structure across tax haven countries?
- Maybe your capital structure suggests you are a shell company, or a special purpose vehicle – at the end of the day, $1 share cap shows little commitment to doing real business regardless of the original intent.
Personal Credit Assessment
A business’ greatest asset is its people, but they could also be its greatest downfall. As a Director and/or shareholder, how do you look? What does your personal credit say about you? This will be a reflection on your business too.
KYC – Know your client!
In the light of more stringent KYC regulations in place since November last year, banks are also more strict with clients who do not meet the customer information they require.
For instance, while you might have left out your residential address here for personal reasons, it could be perceived as a warning sign by the bank that you are concealing something! A more transparent and complete client information will help you look more credible to the bank.
People are people and a relationship manager involves a relationship
A bank is afterall made up of the people who work in it. Have you upset or offended them some way or another? Remember that it is the person you’re meeting at the bank, the relationship manager, who is in charge of your approval. Maintaining friendly relations with them could go a long way in making it easier to open your company’s bank account.
And there you have it! You can bookmark this post to keep as a quick troubleshooting guide. We hope it has been useful for you!