Business bank accounts
One of the most common questions our customers ask when applying for a self-employed IVA is whether they will need to switch banks and get a new bank account.
If you owe money to your bank (for example an overdraft, credit card or loan) and want to include this in your self-employed IVA, you should consider opening a new current account with a different bank.
It is perfectly possible to keep your existing business bank account in a self-employed IVA. However, there are a number of factors that you should bear in mind:
- If your business bank account is overdrawn by a significant amount, then it may be best to include the debt in your self-employed IVA, and to open a new bank account to use for your business in future
- If your business bank account is only overdrawn by a small amount – and you need this credit facility to pay business/trade suppliers before your clients pay you – you can continue using this existing business bank account throughout yourself-employed IVA. However, you will need to make sure you keep within the agreed overdraft limits, so that the bank will allow you to continue using the account
- You also need to consider whether you owe any other money to other parts of the same bank which operates your business bank account. For example, you may also have a credit card or loan with them. If you do, the lender may use their ‘right to offset’. This means that if you owe them money, they may take money out of your business bank account to pay this off in full. This could even happen if one of the debts is included in a self-employed IVA. If this does happen, it could leave you short of money. If you do owe money to other parts of the same banking group, it is probably best to open a new business bank account elsewhere – to reduce the possible impact of ‘right to offset’.
It is possible to open a new business bank account while you are proposing a self-employed IVA, or already in a self-employed IVA. However, as it is likely that you’ll have a poor credit rating, banks may not give you any overdraft facilities on the new account, as they will probably see you as a poor credit risk.
It may be better to keep your existing business bank account – especially if you use it to receive payments from customers and pay your trade/business suppliers. It will obviously be time-consuming – and maybe costly – to change your bank details on all your correspondence.
However if your bank does have a ‘right to offset’ and you owe them money, it might be necessary to switch accounts.
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