Small and medium-sized enterprises (SMEs) represent an $850 billion market to banks worldwide, but the banking industry often overlooks SMEs in favor of large enterprises and retail customers.
As a result, 89% of SMEs surveyed by CapGemini are dissatisfied with their banks and considering shifting their accounts to a fintech alternative.¹
If you’re among them, or looking for information on how to close a business bank account for any other reason, read on to find out what you need to know.
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How to close a business bank account: 5 steps
Closing a business bank account is relatively simple, but there are steps you need to follow to make sure the process runs smoothly.
1. Check for any outstanding payments
Before you close an account, you must make sure all outstanding checks have cleared, and any outstanding transfers into your account have arrived.
You should also cancel any direct debits and make sure there are no pending outgoing payments left to be completed. Otherwise, this could result in vendors not receiving funds or invoice payments from clients not reaching you.
2. Collect necessary documents for closing your business account
You’ll need to provide several documents to your bank so that they have the information they need to close the account.
These include:
- Proof of the business name and address
- Business incorporation or partnership information, including the date of formation and business structure
- Business bank account details
- A letter formally requesting the account closure and the account where any funds in the account should be transferred
- Confirmation of persons authorized to open and close the company’s accounts
3. Send the formal request to close your business bank account
The formal request letter must be signed by all persons authorized to conduct financial transactions on behalf of the business. You can check the business organization documents to confirm who this includes.
Send the letter to notify the bank that you intend to close the account. Depending on the bank, you may also have to finalize the process in person.
4. Open a new business account and transfer funds
If you’re still running a business, you’ll need to open a new business account to send and receive payments. Once you’ve made sure that all outstanding payments have cleared, you can transfer funds to the new account.
Notify any vendors, clients, and other parties and provide them with the new account details to avoid disruptions to services or payments.
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5. Confirm that your business account has been closed
It’s important to confirm that the account is completely closed, to avoid unexpected charges or missing payments down the line. Make sure that any final documents have been signed, and any fees associated with the account closure are paid in full.
Check the final account statement to confirm there are no unexpected transactions so that you can contact the bank right away if there are any issues.
Download all documents and statements for your records. You’ll no longer have access to them when the account is closed.
How to close a business bank account: Examples
Each bank has its own process for closing business accounts that you should follow. The most widely used business account providers include Bank of America, Citibank and Lloyds. Below we provide some guidance on how to close a business account with each one.
How to close a business bank account Bank of America
Here’s a brief overview of how to close a Bank of America small business account:²
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If Bank of America has the correct email address on file, it will send confirmation once the account is officially closed. It will also mail the final account statement.
How to close a business bank account with Citibank
For information on how to close a business bank account with Citibank, you’ll need to contact your account manager or Documentation Specialist.³ They will discuss your requirements and send you an account closure form.
Once you have received the form, you should:
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Citi will verify the authority of the signatories on the form to ensure they have the power to close accounts.
How to close a business bank account at Lloyds
If you need to know how to close a business bank account with Lloyds, you can email or mail a completed account closure form.⁴
You should complete Section 3 of the form with contact details to receive a text or email notification when Lloyds has received the completed form, and when the account is closed.
Even if you don’t sign up for the notification service, you’ll still receive a closing statement by mail once the account is closed.
Key factors to consider when closing a business bank account
It takes careful planning and attention to detail to avoid potential complications when closing a business bank account. Below are some important factors to consider.
Check business account contracts
You should check the contracts or agreements that your business has with the bank to ensure that you comply with the terms for account closure. This could include a certain notice period for closing the account or paying any outstanding fees.
Keep all documents for your records
It’s essential to keep copies of all documentation and communications associated with the account closure. This will not only help you make sure that the account is closed successfully, but is also important for the business's financial records, accounting, and potential audits.
Close or transfer linked services
If the business bank account is linked to other banking services such as merchant accounts, credit lines, or loans, make sure to close or transfer those accounts as well.
Check the account terms if you have an overdraft to see whether you can transfer it or need to repay it in full before you can close the account.
Check new account terms
You should confirm the terms and conditions of your new business bank account before closing the existing account. Clarify any details that are unclear and discuss any concerns with the account provider, or you could end up equally unhappy with the new account.
Avoid leaving a dormant account
If the business has an account that is no longer used – perhaps because it was opened for an introductory offer – it will become inactive after 12 months with no transactions. It will become a dormant account after 24 months, at which point the bank will close it and turn over any funds remaining in the account to the state. It’s easier to close the account before this happens than having to apply to the state to recover the funds.
An inactive account also presents a security risk, as a fraudster could gain access to the account without you realizing it, as you may not be monitoring it closely. Closing the account removes this risk. It also avoids inactive account fees that some banks charge.
Choose a business account that suits your business needs
When you decide on which provider to choose for your new account, you should choose one that offers the services your business will need in the future. Research different accounts by comparing their features, charges, and accessibility.
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Sources:
- 89% of SMEs surveyed by CapGemini
- Bank of America Account Frequently Asked Questions
- Account Closures | Digital Account Guide | Treasury and Trade Solutions
- Close A Business Account - Lloyds
All sources checked September 2023.
*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information. This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional. We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
