For Bank Loans Ratings Are Important to Getting Approved
Business bank ratings indicate the extent to which your business can manage and repay loans.
Your bank account reflects how well you manage cash flow, important for lenders assessing debt handling. Low balances or returned checks can hurt loan applications.
Your "Bank Rating" is determined by your average daily minimum balance over the past 3 months. It serves as a key factor for lenders in evaluating your business's debt servicing capacity. A "Low 3" bank rating indicates that your business had only $100 to $300 available to cover outstanding debts in the last 90 days. If you are seeking a loan requiring a $1,000 monthly payment, lenders are likely to decline your application as they see no evidence of your ability to meet such obligations. Maintaining a favorable bank rating is crucial for lenders to consider your application.
What Does A Low 5 Bank Rating Mean?
Bank Ratings Consist of Three Components...
1. Your balance rating is the first crucial component. It represents the average minimum daily balance maintained in your account over the past three months. To achieve a "Low 5" rating, you must maintain at least $10,000. A balance of $5,000 will earn a "Mid 4" rating, while $999 will result in a "High 3" rating. It is essential to maintain a minimum "Low 5" bank rating ($10,000) for a consecutive three-month period. Unfortunately, without this rating, most lenders will assume your business lacks the ability to repay its debts.
2. The second component is the bank rating cycle, which spans three months. It is recommended to have at least a "Low 5" rating during the three months preceding any application for larger loans. This demonstrates to lenders that your business is capable of servicing its debts. The amount of money flowing through your account each month is irrelevant. What truly matters is the availability of funds each day over the past 90 days for debt repayment.
3. The third and final component relates to your account management. The presence of NSF (bounced) checks can severely damage your bank ratings. Therefore, it is imperative to prevent any instances of NSF checks moving forward.
Check your business banking general ledger checking account statements for the last three months and look at your average daily bank account balance to be able to self-calculate what lenders are seeing as your current "Bank Rating".
Bank Rating Acctunt Balance
Low 3 $100 - $399
Mid 3 $400 -$699
High 3 $700 -$999
Bank Rating Acctunt Balance
Low 4 $1,000 - $3,999
Mid 4 $4,000 -$6,999
High 4 $7,000 -$9,999
Bank Rating Acctunt Balance
Low 5 $10,000 - $39,999
Mid 5 $40,000 -$69,999
High 5 $70,000 -$99,999
Bank Verification - Lenders Gain Deeper Insights into Your Business.
In this digital era, every lender has the ability to view your business banking activity through a bank verification process.
When you provide your business bank account routing and account number lenders and credit providers can do a "Bank Verification" where they can then see:
- A 36 month summary of deposits, average daily balances, and month ending balances
- Current balance status of the submitted bank routing and account numbers
- First date opened and last activity dates of the business bank account
- Bank ratings of that account and other accounts associated with the company
- Dates and amounts of all NSF returned debits and checks on the account
- Verification of all account signers including; Name, SSN, and Driver’s License
The bottom line is that in today's digital age lenders and credit providers of all kinds can instantly access data on your business banking activity. This means they can see how much money has gone through your business bank account each day, month, year and how much of that money stuck to you.
Your monthly revenue and your average daily bank balances have become an extremely critical part of your business getting approved for no personal guarantee loans and credit lines. It is also the single most important factor in your business showing it's ability to debt service.
How To Get At Least A Low 5
If you don't have the $10,000 required for the low 5 rating, consider borrowing it from friends or family. Maybe pull it off personal credit cards or out of the equity in your home. 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 (6) months. Maybe offer to pay interest. We will be looking at other creative ways to get the money you need.
Don't Have $10,000? Don't Worry ... Bank ratings are totally separate from building business credit and in no way affect your ability to build strong scores. So if you don't have the $10,000
No $10,000? No problem! Bank ratings are completely independent of building business credit and have no influence on your ability to establish strong scores. So if you don't have the $10,000 or can't access it to secure a Low 5 Bank Rating, it won't affect your capacity to build robust business credit scores in any way. However, bank ratings can certainly impact your eligibility for larger cash-based business loans and credit lines in the future. Therefore, when your business starts generating revenue, remember to maintain a daily balance above $10,000 to sustain at least a Low 5 Rating.
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Email: admin@vergefive.com
Address:
100 South Garnett St
Henderson NC 27536