How to Cash a Business Check Without a Bank Account
Cashing checks is an important task for businesses and consumers. While online payments are popular, people aren't always trusting of this option. Because of this, having a business bank account in-place is key. However, some business owners prefer to operate without involving banks.
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In this post, we'll explain how to cash checks without a business bank account. We'll also explain why it's still prudent to have a bank account for your business.
What Happens When You Receive Business Checks?
If you're a sole proprietor, your business is likely tied to your personal checking account. However, from a legal standpoint, there's no protection of personal assets.
When you have a different business form, such as an LLC or corporation, receiving checks becomes a bigger issue. Customers will likely address the check to your business's name. Without an account, it will be challenging to retrieve the funds.
Business vs. Personal Checks
Personal and business checks are essentially used the same way; both are drawn from an account holder's bank account for the amount displayed on the checks.
However, one difference is that personal checks are usually the size of dollar bills and can fit easily in wallets. Business checks are larger, which helps banks recognize that it's a business check.
For a check to be valid, it must contain several items:
- Account number
- Bank name
- Routing number
- Valid date
- The amount as a number and spelled out
- Signature
Business checks will often contain security features not found in personal checks. For instance, many business checks have holograms or watermarks to help banks reduce fraud.
Common Issues with Cashing Business Checks
There are certain situations in which cashing business checks without a bank account can cause problems.
For example, let's say that you receive a check from a customer, and it's made out to your business's name. 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 unable to get the check cashed. The best course of action is to open a business banking account. Your other options are:
- Ask the customer for a credit card number
- Accept a wire transfer (which will be costly for your customer)
- Ask the customer to write a new check to your personal bank account
- Seek out a check cashing option that doesn't require a bank account
Check Cashing Without A Business Bank Account
If you have a business bank accounts, cashing a check is easy. However, without a business bank account, it becomes more complicated.
If you can't open a business bank account, here are your options for cashing business checks:
1. Walmart and Other Retail Stores
Most Walmart stores offer check cashing services. Businesses can present their checks to the Money Center or Service Desk, although check cashing isn't available in every state.
The company charges fees based on the transaction type, and you'll have the choice of getting the money in cash or via a Walmart MoneyCard (which may come with additional fees).
In most cases, Walmart won't cash checks for amounts greater than $5,000. However, you can cash multiple checks when each is below that limit.
To cash a check, Walmart will ask for valid government-issued identification and may also require additional verification.
Other retailers, such as supermarkets and drugstores, offer check-cashing services, but they may not accept business checks.
2. Check Issuing Banks
Usually, if you go to the issuing bank to have your check cashed, they can verify the account is legitimate. However, depending on the bank, you may be charged a processing fee. This fee may be waived if you decide to open an account at this bank.
If you can find a friend or family member who has an account at the issuing bank, you may be able to avoid 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, as this person will need to be available for every check cashed.
3. Specific "Money Centers"
Money centers are usually willing to cash business checks, but they usually come with fees and require an application.
When utilizing money centers, you'll receive cash quicker than you would if you went to a bank. However, the fees charged are higher, because that's how the centers make money.
4. Checking Cashing Stores
You'll likely see stores in small neighborhoods that offer check cashing services. They're usually lenient when cashing business checks, but can be expensive.
The fees charged 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, but if you use this service often, the fees will add up.
5. Prepaid Debit Card Transfer
Opening a prepaid debit card can help when cashing business checks.
Mobile apps such as InGo allow you to scan your business checks and 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.
It's important to note that prepaid cards expire eventually, but your funds will remain safe. If this occurs, you must open a new prepaid debit card and transfer your funds (which comes with a fee).
Why a Business Bank Account Is Important
Opening a business bank account shows your customers that your business is legitimate, and makes depositing checks much easier. Although there's in-store and online check cashing services that don't require a bank account, they typically aren't recommended as a long term financial solution.
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Editor's Note : This post was updated for accuracy and comprehensiveness in April 2021.
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.
How to Cash a Business Check Without a Bank Account
Source: https://www.forafinancial.com/blog/small-business/check-cashing/