Your business bank rating is key part of becoming bankable
Business bank ratings indicate the size of the loan your business has the ability to debt service.
Your business bank account reflects how you manage your cash flow. Lenders want to know that your business cash flow is capable of handling the business debt and expenses consistently. Bank accounts with low average daily balances, or that show many NSF returned checks, can get your business loan applications declined.
If a loan amount requires a $1,000 monthly payment then lenders need to see at least a "Low 5" bank rating. Your "Bank Rating" is based on your average daily minimum balance over the last 3 months.
Maintain A Minimum Low 5 Bank Rating
Compliance Item Fix - What Does A Low 5 Bank Rating Mean?
|Bank Rating||Account Balance||Bank Rating||Account Balance|
|Low 4||$1,000 - $3,999||Low 5||$10,000 - $39,999|
|Mid 4||$4,000 - $6,999||Mid 5||$40,000 - $69,999|
|High 4||$7,000 - $9,999||High 5||$70,000 - $99,999|
Bank Ratings Consist of Three Components ...
1. The first component is your balance rating. This rating is your average minimum balance maintained in your account over a three (3) month period. $10,000 will rate as "Low 5", $5,000 rates as "Mid 4", $999 rates as "High 3", and so on. You need to maintain a minimum "Low 5" bank rating ($10,000) for at least 3 months. Unfortunately, without at least a "low 5" rating, most lenders will assume your business has little ability to repay.
2. The second component is the bank rating cycle which is three (3) months. You'll want to have at least a "low 5" for the three months before applying for larger loans.
3. The third component has to do with how you manage the account. NSF (bounced) checks destroy bank ratings. From this point forward, NSF checks are something you cannot allow.
How To Get a Low 5
If you don't have the $10,000 required for a low 5 rating, consider borrowing it from friends or family. Maybe pull it off personal credit cards, out of the equity in your home, or take out a personal low at a credit union. If you borrow it from friends or family, explain to them you will not be "using" the money, but that it will just be sitting in your business checking account. Tell them you can return it to them in six months. Maybe offer to pay interest.
Bank Ratings Are Not Business Credit Ratings
Bank ratings are totally separate from building business credit and in no way affect your ability to build strong scores. If you don't have the $10,000, or can't get access to the $10,000 to secure a Low 5 Bank Rating, it will have no impact on your ability to build strong business credit scores. Bank ratings can have an impact on your ability to secure business loans and credit lines, so when your business starts making money remember to keep your daily balance above $10,000 to maintain at least a Low 5 Rating.
Bank Ratings Are Vital To Business Loan Approvals
Your bank rating becomes very important when you apply for a business loan or line of credit. Your bank, and other business lenders, will check your business bank rating and your business credit reports. What they see from these two factors will help determine your level of risk of default, how you manage your money, and your ability to service the requested debt.
Inside the Level4Finance business success system, you will have access to step-by-step comprehensive business credit building instruction to obtain everything you need to build and maintain strong business credit scores and to pre-qualify for a spectrum of business loan programs.