5 Check Cashing Options Without A Business Bank Account
A business owner may have closed a business banking account. However, they receive some checks addressed to that business. The business may have changed its name, or it’s possible the business is no longer a going concern but received money owed from customers.
What Happens When You Receive Business Checks?
If you’re a sole proprietor, your business is likely tied to your personal checking account. From a legal standpoint, there is no protection of personal assets in this business form. There’s little advantage to having a separate business checking account. Customers will likely make the check out in your name.
When you have a different form for your business, such as an LLC or corporation, receiving checks becomes a bigger issue. Customers will likely send the check in the name of the business. Without an account, you’ll have a harder time retrieving the funds.
There are options, which we’ll describe in this article. The choices depend on your situation, but the best option is to open a business checking account. However, that may not be right for every business, especially if you’re a new business owner.
If you’re like most business owners, you’ll need to cash the checks to keep your business functioning. Waiting for the right time to open a checking account may cause cash flow problems.
If you have registered your business as a corporation or LLC and can show documentation, banks or other financial institutions can cash your check. You may be charged a fee, however.
Business vs. Personal Checks
Personal and business checks work off the same basic concept. Both are drawn from an account holder’s bank account for the amount displayed on the checks. One noticeable difference is the size of the checks. A business check is usually bigger than a personal check.
Personal checks are usually the size of dollar bills and can fit easily in wallets. Business checks are larger, which helps banks recognize that the check is from a business. There’s no legal requirement for checks to be a certain size. The sizes are by convention.
For a check to be valid, it must contain several items. This includes the account number, the bank name, and the bank routing number. It must also have a valid date, the amount as a number and spelled out, and the check must be signed.
Individuals can personalize their checks with cute pictures of animals or cartoons. These personalizations cost more money, but some people enjoy the novelty. For business owners, however, placing this type of personalization can be viewed as unprofessional. Some business owners will add pictures related to their industry, but this costs more as well.
Business checks will often contain security features not found in personal checks. For instance, many business checks will have holograms and watermarks. These features can help banks reduce fraud.
Issues With Cashing Business Checks
You receive a check from a customer, and it’s made out to the name of your business. However, you have yet to open a business checking account. What will happen with this transaction?
Unfortunately, without a business checking account, you may be out of luck in getting the check cashed from a bank, as most banks won’t permit this to occur. The best course of action is to open a business banking account. Then, the bank will accept the check.
If you aren’t ready to open an account, your recourse may be to ask the customer for a credit card number, assuming you accept credit cards. If not, the next option is to accept a wire transfer, which can be costly for your customer. You could offer to pay by discounting the sale.
You could ask the customer to create a new check made out to your personal bank account. This can be acceptable for new business owners. In the longer term, though, it isn’t professional.
Banks are reluctant to cash business checks without an account. Anyone can arrive at the bank claiming to work for the business and state they have check-cashing authority. Without an account backing the funds, there would be no recourse for the banks.
Check Cashing Without A Business Bank Account
For companies who have business bank accounts, cashing a check is easy. You cash the check into the account, just like you would a personal check. However, what happens when you don’t have a business bank account? How can you obtain the necessary funds?
If you have the means to open an account, that’s the best course of action. However, there are options for cashing business checks without an account. The following article describes five ways to cash checks without an account.
1. Walmart and Other Retail Stores
Most Walmart retail locations offer check cashing services. Businesses can present their checks to the Money Center or Service Desk. However, check cashing isn’t available in every state.
The company charges fees based on the type of transaction. Also, you’ll have the choice of getting the money in cash or via a Walmart MoneyCard. There could be additional fees for the MoneyCard.
The company will accept several types of checks, including business checks. Customers may want to call the Walmart store before attempting to cash the check. There is also information on the types of checks on the company’s website.
The company has a limit on the amount that it will cash. In most cases, they won’t cash checks for amounts greater than $5,000. However, you can cash multiple checks when each is below that limit.
Walmart will ask for valid government-issued identification. They may ask for verification of your business information. When you call the store, you can ask about these requirements.
Another advantage of calling the store is you can find out about the hours check cashing is available. It may be different than store hours.
Other retailers, such as supermarkets and drugstores, offer check-cashing services. However, they don’t often provide for servicing business checks.
2. Check Issuing Banks
This is likely to be the best option for cashing a business check without an account. Go to the issuing bank to have the check cashed. They can verify the account is legitimate.
Depending on the bank, you may be charged a processing fee. However, if you’re willing to open a business banking account, the fees may be waived.
If you can find a friend or family member who has an account at the issuing bank, you may save on the fees. The bank could use this person’s account to back the check for your business. However, this option shouldn’t be used as a long-term solution. You’d need this person to be available for every check cashed.
One challenge with using an issuing bank is if the bank location isn’t close. If the bank offers access to cash checks online, this may not be an issue, as they may accept scanned checks. However, there’s no guarantee they’ll accept a business check online without an account.
3. Specific “Money Centers”
Money centers are usually willing to cash business checks. The fees charged depend on several factors. You’ll likely need to submit an application, and approval isn’t guaranteed. These companies reserve the right to refuse cashing checks, even if you’ve done so in the past.
When working with money centers, you’ll get your cash quicker than banks. The fees charged will be higher, as that is how they make their money. Some businesses use these centers exclusively due to quick access to cash.
The fees that are charged with money centers often depend on the risks associated with the check. The workers of these centers are trained to evaluate the risks and charge fees accordingly. Government checks are lower risk than most other types. Not all money centers will accept personal checks, but some do for a higher fee.
4. Checking Cashing Focused Stores
You’ll likely see stores in small neighborhoods that offer check cashing services. These are likely to be the most lenient when cashing business checks. However, they’ll also be the most expensive.
These stores analyze each check to assess the risk. Higher-risk checks will require higher fees. Even when the checks are not as risky, these stores will charge more than the other check-cashing options.
The fees are usually based on a percentage of the check amount and can be for 5 percent or more. For smaller checks, this may not seem like much. However, if you use this option often, the fees will add up.
Perhaps the biggest advantage is that you’ll get the money in full (less fees) immediately. Banks usually put a hold on checks, depending on the circumstances.
5. Prepaid Debit Card Transfer
Opening a prepaid debit card can help when cashing business checks. An app such as InGo, allows you to scan your business check. InGo is one of several online check cashing services that’ll add cash to your prepaid debit card, minus a fee. If you’re willing to wait ten days, the company may waive the fees, as long as the check clears.
The fees can be high for prepaid cards, but it’s usually an easy option for those without bank accounts. The prepaid cards expire, although your funds are safe. You’d need to open a new prepaid debit card and transfer your funds. There’s usually a fee associated with this.
Depending on the service used, you can pay bills online with your prepaid card. For business owners who don’t have a business checking account, this option offers an alternative when paying bills. There are even some options for rewards when using the card.
Why a Business Bank Account Is Important
Opening a business bank account shows your customers and potential customers that you take your business seriously. It also adds to your branding. When customers make out a check to your business name, it reinforces the idea that your business is legitimate.
If your business is an LLC or corporation, you’ll need to register with the state. Services such as the Company Corporation can help facilitate the paperwork. You’ll be assigned an EIN. This number will be needed when opening a business bank account.
The IRS frowns on intermingling personal and business finances. For sole proprietors, this is less of an issue. However, for corporations and LLCs, it could trigger an audit.
The intermingling can also cause problems when faced with lawsuits. Opposing lawyers will target your personal assets when they discover you have been using personal funds for your business operations.
If cash flow is an issue for your business, speak to one of our Capital Specialists to learn about our financial services. Call for a free quote today.
Frequently Asked Questions
Is a corporation or LLC required to open a business bank account?
There ‘s no requirement for a corporation or an LLC to open a business bank account. However, based on the information provided in this article, there are many advantages to having an account.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.