Your Business Bank Rating

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  Your Business Bank Rating

  Your business bank account reflects the strength of your company’s revenue and how you manage its cash flow. Lenders want to know that you business cash flow is capable of handling the business debt and expenses on a consistent basis. Bank accounts with low average daily balances, or that show many NSF returned checks, can get your business loan application 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 90 days.

  Bank Rating Account Balance

  Low 4 $1,000-$3,999

  Mid 4 $4,000-$6,999

  High 4 $7,000-$9,999

  Low 5 $10,000-$39,999

  Mid 5 $40,000-$69,999

  High 5 $70,000-$99,999

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  Bank Ratings Consist of 3 Parts

  1. Balance Rating – The first part is your balance rating. This rating is your average minimum balance maintained in your account over a three (3) month period. A $10,000 balance will rate as a “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. Bank Rating Cycle – The second part is the bank rating cycle which is three (3) months. You’ll want to have at least a “Low 5” rating for the three months prior to applying for a traditional loan.

  3. NSF History – The third and final part has to do with how you manage the account. NSF (non sufficient funds) checks destroy bank ratings. From this point forward, NSF checks are something you cannot allow so be sure to add overdraft protections as soon as possible.

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  How to Get a Low 5 Bank Rating

  If you don’t have the $10,000 required for the low 5 rating, consider borrowing it from friends or family. Remember, the funds deposited into your company’s checking account is used to season the funds not be spent.

  Be sure to explain this to your family if you borrow the funds. Tell them you can return it to them in six (6) months. Maybe offer to pay interest. In the steps that follow, we will be looking at other creative ways to get the funding you need.

  Don’t Have $10,000? Don’t Worry.

  Bank ratings are totally separate from building business credit and in no way effect your ability to build strong business credit reports and scores. So if you don’t have access to $10,000 to secure a Low 5 Bank Rating, it will have no impact on the business credit building process.

  However, bank ratings can definitely have an impact on your ability to secure a traditional business loan and/or traditional lines of credit in the future. So when your business starts making money remember to keep your daily balance above $10,000 in order to maintain at least a Low 5 rating.

  Once you have established a Bank Rating of Low 5 now it’s essential to maintain that balance for a period of 90 days prior to applying for a business loan or line of credit from your bank. By achieving a Low 5 Balance Rating the bank will look upon your business as having favorable cash flow and a strong ability to repay.

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  Tast to Complete

  Determine Your Bank Rating

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  Task to Complete

  Work to achieve a 'Low 5' Bank Rating