Need advice setting up Charity bank account with poor credit score

rreeve

My personal credit rating is really bad. So bad in fact, I would find it near on impossible to open a new bank account beyond a basic account.
My problems started when I became unemployed and I have no been unemployed for the last five years.

Rather than continue looking for work, I've decided to start my own charity. Initially, it will only be a small charity (less than £5000) so I won't be able to register as a charity. I can still be formally recognized as a chaity by contacting HMRC. This is what every charity must do if they have an income less than £5000. When your income goes over this amount, you can then apply to become a registered charity with your own charity number.

This is all very well and good but my real problems come when thinking about setting up a bank account for this charity. Obviously, I will need the charity to have it's own bank account but how will I be able to do this if my personal credit rating is terrible.

Setting up this charity is something that I hope will eventually get me out of the financial hole I am in right now and it will give my life a purpose again. I really cannot afford to put it off any longer. In an ideal world I would sort out my own credit rating before I start this new venture but this isn't an option for me so what can I do?

Will I have trouble opening a bank account for this charity?
What can I do (short-term) to get around any problems I may face?

Any advice would be appreciated.

rreeve

nobody with ANY advice?

:-(

Edi81

You want to set up a bank account for a "charity" which can't be registered as a charity until income is over £5k.
Until it's registered as a separate legal body (with all the paperwork, trustees etc) I don't think there is a way other than you trading as X.

Mattygroves2

I'd get the HMRC approval first as you'll have to give that to access charity accounts. Then you should be able to open an account in the charity name without you being credit checked but you (and your fellow trustees) will need to be identity checked. Presumably you will need two signatures for all transactions anyway so fraud risk would be limited. You won't get an account with any sort if overdraft facilities anyway and they will bounce cheques that would take an account overdrawn.

Your comment that you expect it to get you out of a financial hole confuses me as if you are a trustee ( running the charity) you are only able to take reasonable expenses from the charitable funds which need to be backed up by receipts. So unless you become an officer (which means you aren't in control) there is no money in it for you.

PlutoinCapricorn

There was a post on here a while back about someone who thought of setting up a charity so as to get a small salary. Most responders did not think this was a good idea.

The whole point of setting up a charity is to give rather than to get; the only time paying a salary is justified is when the income is decent and would increase if paid staff were appointed.

Yorkie1

PlutoinCapricorn wrote: »

There was a post on here a while back about someone who thought of setting up a charity so as to get a small salary. Most responders did not think this was a good idea.

The whole point of setting up a charity is to give rather than to get; the only time paying a salary is justified is when the income is decent and would increase if paid staff were appointed.

I quite agree.

A charity needs to be set up with a public benefit in mind. There are strict criteria to be met before anyone can receive any payment (other than expenses, which have to be reasonably incurred).

I've recently looked into this on behalf of a relatively large non-charitable, non-profit making organisation which is considering becoming a charity, but one of the main directors is also one of the main employees (if I recall rightly) - and he cannot be both an employee and a trustee under charitable status (or something like that). The risk of conflict is far too great.

rreeve

PlutoinCapricorn wrote: »

There was a post on here a while back about someone who thought of setting up a charity so as to get a small salary. Most responders did not think this was a good idea.

The whole point of setting up a charity is to give rather than to get; the only time paying a salary is justified is when the income is decent and would increase if paid staff were appointed.

I totally understand what you are saying but I honestly don't think there is anything immoral or unethical in setting up a charity that helps people and at the same time helps yourself with a steady salery. In todays world, nobody works for free and nobody is expected to. Personally speaking, I would admire and respect anyone who built a charitable organization from the ground up, even if they took a fair wage for themselves to compensate the full-time hours they put in to build the charity. After all, we all have to eat.
Yes, of course, in an ideal world a charity would allocate all of it's finances towards it's charitable project but this rarely happens in the real world. Think about it, if the person starting the charity couldn't take a reasonable wage from the charity and this person couldn't afford to work for free, the charity wouldn't exist at all. It's basic business. In fact, I would be willing to bet that a vast majority of successful charities that are around today started off in a very similar way. Maybe some people may have disguised their early income from a start-up charity by dipping into overdrafts or using a line of credit but when all said and done, the charity probably ended up paying their early wages eventually.

I can see why it's a taboo topic and I can also see how it could damage a star-up charities reputation before they've even begun operations but it's all about the greater good and it makes perfect economical sense when you consider this greater good.

This issue reminds me off the ethical problem that people have we commercial charity fundraisers. These companies take a fairly high percentage from any donations they collect from the public to cover their own business fee's. Now the charities themselves are fully aware of this but from their perspective it makes good business sense because they are raising more money even after they've paid the fundraisers fee's . Your average man on the street who donates £1 a month to Cancer Research via one of these fundraising companies, will probably only see something like 30p of his £1 actually going to Cancer Research. It's certainly an ethical dilemma but Cancer Research makes more money doing this than if they don't so for the interest of their charitable cause, morally speaking they are doing the right thing by their charity.

It's all a fascinating ethical debate but I honestly don't see anything wrong with staring a charity and earning a fair wage from it. In fact, the world would be a much better place if anyone done this.