4 Things To Do When Your Business Bank Account Is Closed

Bertrand Théaud
Published: 20 Jul 2020

Has your bank unexpectedly closed your business account?

It is a serious setback for business, when your business bank account is closed as it could result in late payments for salaries, vendors, bills that are linked to your account. As well as potentially making it more difficult to get a new account somewhere else.

Account closure is inconvenient, to say the least, and has the potential to jeopardise your business.

Obviously, you will want to know why your account was closed, but your bank may refuse to disclose any information. However frustrating for you, remember that – like any other private businesses - this is within their rights. Banks have no obligation to disclose the reason for closing an account.

What to do when this happens?

First, let’s share some observations on the potential reasons for banks to close your account.

Why your business bank account is closed?

Typically, your bank will send out a written notice that your account is going to be closed (without spelling out the exact reasons for doing so) and ask you to go to a branch to collect a check for the balance in your account.

Why is that?

All banks have come under intense pressure from regulators to improve their understanding of their clients’ business. Particularly from the perspective of anti-money laundering and terrorist financing.This is why opening a bank account in Hong Kong is so difficult for small businesses and why many business bank accounts are closed.

Some of the most common reasons:

  • Suspicious transactions
  • Absence of transactions (i.e. account considered as dormant)
  • Transactions with high-risk countries
  • The location of your clients and suppliers, and sometimes their reputation
  • Inability to provide supporting documents for payments made (although this usually results in an account suspension rather than account closure)
  • Breach of the terms & conditions

What to do when your business bank account is closed:

Tip #1: Don’t waste time arguing

Banks have a right to decide that they don’t want someone as a customer, as long as they give at least 30 days’ notice (usually by mail) and their reasons are not unlawfully discriminatory (banks in Hong Kong have to respect the Code of Banking Practice issued by the Hong Kong Monetary Authority).

Tip #2: Stop incoming payments

Inform clients who you know will pay you soon, prevent payments from bouncing back and incurring additional charges. You also want to avoid your clients t questioning your reputation.

Tip #3: Stop or change automatic bill payments

If you have set up automatic bill payments to this account, make sure you either suspend them or make other temporary payment arrangements.

If you don’t, then you’re looking at getting hit with late fees or returned payment fees, which only adds to your financial headaches.

Tip #4: Look for an alternative solution

Don’t take chances; a closed bank account can’t be reopened.

Therefore, you’ll need to set up something as quickly as possible to prevent future headaches. Having said that, opening a bank account with a traditional bank in Hong Kong is not easy nor even the best option for most businesses.

Ask yourself what you actually need? Do you need to be able to bank and cash cheques or, like most businesses, are you simply receiving payments online? If a new bank is going to take several months to open your business bank account, how will you operate in the meantime?

Instead, look at what Fintech offers. Opening an account with Statrys is fully online and only takes 10 minutes of your time.

How to get money out of a closed bank account

If your business bank account is closed then usually, the bank will issue you a cheque for the balance in your account and ask you to collect it at a branch so make sure they have your correct name and address on file.

How to avoid having your bank close your account

You’re probably wondering if there’s anything you can do to avoid having your business bank account closed. We wish we had a concrete solution. Unfortunately, it’s virtually impossible to predict what banks want.

At a minimum, fill in your annual risk profile questionnaire; keep your admin (invoices, contract, purchase orders, etc.) in order in case of an audit; and avoid an overdraft.

author
Bertrand Théaud

Bertrand Théaud is the Founder of Statrys. His entrepreneurial journey has inevitably exposed him to the difficulty in dealing with banks, especially in Hong Kong. When he realised the number of SMEs going through the same challenging experience, he decided to start Statrys: a digital alternative to traditional banks specifically designed to serve the needs of Asian SMEs and start-ups...

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