How to Close a Business Bank Account: 6 Things to Settle Before the Account Is Gone

To close a business bank account, you go into the bank and talk to a teller, or contact the bank on the phone or online. But beware: If your business is underwater and owes money, closing your account is not going to make the situation go away. You are still obligated to pay your debts and your creditors can still send you to collections, or worse. If you are considering closing a business bank account, take these steps before you officially do it.

Closing a Bank Account Where Your Business Owes Money

Banks have the right to withdraw money from one bank account to pay down money owed on another product that you have with the bank (such as a mortgage or line of credit). The practice of withdrawing money to pay down your debt is called setoff, and it can happen without a court order. Because of offsetting, you should think twice about closing a bank account where your business owes money.

If you borrowed money by using a merchant cash advance (MCA) or used a company cash advance that is being repaid directly out of your bank account, it’s best not to close your bank account. When you close your bank account, these debits will not be withdrawn from your account (no bank account = no more automated withdrawals). But the debt doesn’t go away, and the lender could take a legal action against you and perhaps even sue you in an attempt to recover the rest of what they are owed. Read over your agreement to see what exactly happens in the event of a default.

MCAs normally have a term in the contract requiring you to keep the account open, and they also give funders the option of declaring a breach. If that happens, the full balance is usually due, immediately. If the MCA involved a personal guarantee, your own assets may be at risk as well. The contract may also have a confession of judgment, which lets the funder get a judgment against you without any court hearing.

Good news: The lender can’t take your personal money (like funds in your personal checking account) just because the business defaulted on the loan and shut down the business bank account. Bad news: If it got a judgment against you because of a personal guarantee, then it may be able to take your money - but that would be true even if the bank account was still open.

Before You Close a Business Bank Account

Business cash management involves so many moving parts that sometimes you set up payments and then forget about them. But all those parts are still moving, and they will cause problems if that bank account disappears. Before you close a business bank account, double-check your monthly bank statement to identify all business obligations that are being drawn from your account, so that you can be sure there won’t be any disruptions. If you set up direct deposit on payroll, or bills with your vendors and others from the account you will be closing, make sure to contact them and change these payments to your new account. And don’t wait until the last minute. That includes SBA loan payments, which since October 1, 2025, have to be paid online. If you’ve already set up your online payment account, log in and change the account information.

What happens to checks written to others that haven’t been cashed yet, or to checks you deposited that don’t yet show up in the bank’s system? Here’s the bottom line: don’t close your business bank account until every single check you have written to someone else has been cashed and recorded in the bank’s system. Obtaining a temporary stop-payment order with your bank means the bank can’t cash any checks you tell it not to during the valid period of the stop order. A written stop-payment order generally expires after six months, but that can be renewed in writing. An oral stop-payment order is not valid after 14 days, unless you confirm it in writing, and the bank can still pay a check that is over six months old.

Before you close your business bank account, make sure there is a zero balance. Your bank can still request that you pay the overdraft amount. And your bank can also report negative activity to ChexSystems. That record can generally stay on your file for up to seven years and can make it difficult for you to be approved for new bank accounts.

Business bank records are vital for keeping track of expenses, and for business tax deductions. But it’s best not to rely on the bank to provide what you need, after you close your account. Before you close that account, download those documents and file them somewhere safe. Generally, you should keep records that support items of income or deductions on a tax return for a minimum of three years after it is filed. Employment tax records must be kept for at least four years. And for claims relating to worthless securities or bad debt deduction, keep records for seven years. Keep in mind, too, that the IRS will not close out an EIN until all returns have been filed and all taxes have been paid.

Better Repayment Plan

MCAs can get out of hand. But that doesn’t mean that your only option is to close your bank account. Depending on the terms of the agreement, you may be able to work out a better repayment plan. It all depends on if there’s something in the contract, like a reconciliation clause, that lets you pay lower amounts. Or you could see if you can negotiate modified payment terms or a hardship arrangement. Either way, you should look into these alternatives before you get into trouble and miss payments.

If you’re 100% sure you can’t make all the payments, you may be able to settle for less than the full amount you owe. You’ll still be paying something, but not the entire debt. Before you decide that’s the best option for you, though, you should talk to a lawyer with experience in this area who can review all your options with you.