What happens if your business bank fails? Do you lose your money? If your bank, building society, or credit union goes bankrupt, that’s where the Financial Services Compensation Scheme steps in.
Learn more about how the compensation works and whether your funds are protected.
What is FSCS?
The Financial Services Compensation Scheme (FSCS) is an independent statutory compensation scheme in the UK. The body steps in when financial institutions (like banks and building societies) fail and become insolvent.
Are business accounts covered by FSCS?
Yes, the FSCS protects both individual and business funds by paying out specified limits to every customer that the institution cannot pay back itself.
The scheme covers investments, cash deposits, insurance policies, mortgage advice, and debt management, too.
What is FSCS protected?
Deposit protection
The FSCS protects customer business bank accounts, including savings and current accounts held within PRA or FCA-authorised banks, building societies, and credit unions. So if you hold an account in your business name and you meet the eligibility criteria, the FSCS could protect you automatically up to £85,000.
Insurance protection
Businesses are 100% protected by the FSCS for compulsory insurances like employers’ liability. FSCS will cover around 90% of the claim for other insurances, like business disruption insurance. Other insurances 100% covered include things like life insurance and professional indemnity insurance.
If your insurance company has failed, you can submit a claim with the FSCS to see if you’re owed compensation. You might have many legal protection questions when starting your business. Here are a few ways you can get legal support for your new company.
The benefits of FSCS for business owners
There are many benefits to the Financial Services Compensation Scheme for businesses:
Keeps cash flowing
If a financial firm goes insolvent, this can cause immediate financial stress for any business owner who is a customer of the firm. The compensation scheme helps ease those initial worries by transferring funds quickly to keep cash flow healthy.
Get up to £85,000 per eligible business or person, per financial institution
This amount should cover your initial financial fallout from the firm’s insolvency. (Unless you’re a sole trader, in which case, you’re eligible for a £85,000 total limit across all your personal and business accounts with the same institution.)
You don’t have to make a claim for cash deposits
You don’t have to lift a finger; as soon as the financial institution fails, the FSCS identifies all eligible customers and pays out to your business, typically within one week. But timings can vary.
Who is covered by the FSCS?
All types of small businesses, including sole traders, partnerships, limited companies, etc. There are a few types of businesses that are not eligible for FSCS cover, including large companies and public sector bodies.
What financial institutions does the FSCS cover?
Any financial institution authorised by the Prudential Regulation Authority (PRA) or the Financial Conduct Authority (FCA) is protected by the Financial Services Compensation Scheme. So as long as your bank, building society or credit union holding your cash deposits fall within that criteria, you should be eligible for compensation.
Does the FSCS pay out on joint accounts?
Yes, each member is protected in a joint account, so both account holders will each receive funds up to the specified limit.
Need to keep cash flowing?
If you receive compensation but you could use some extra capital in the bank to keep business operations running smoothly, there are some small business loans you can consider.
We work with UK direct lenders offering flexible and affordable repayment options, helping you grow and invest in your business, or simply keep you covered financially just in case.
Some products you can consider include:
We’ve got plenty more business finance options available. Find and compare business loan lenders for free using our comparison tool.
FAQs
0330 223 5036