Bank Ratings Are Important to Getting Approved
Your business bank account rating is key part of becoming bankable
The rating of your business bank indicates the loan size that your business can effectively service. Your business bank account is a reflection of your cash flow management. Lenders want assurance that your business's cash flow is capable of consistently handling its debts and expenses. Loan applications can be declined if your bank account has low average daily balances or if there are records of NSF returned checks.
Your "Bank Rating" is determined based on the average daily minimum balance of the last 3 months. Creating a bank rating requires a minimum of 3 months' worth of data. Lenders use this rating to assess your business's ability to service its debts. A "Low 3" bank rating indicates to lenders that, at any point in the past 90 days, your business had only $100 to $300 available to cover any debts. Consequently, if you are seeking a loan that requires a $1,000 monthly payment, lenders will decline your application as they can see that you have not demonstrated the ability to make such payments. Lenders can check your bank rating within seconds.
Bank Rating, A Minimum Low 5 Is Critical
What Does A Low 5 Bank Rating Mean?
Bank Ratings Consist of Three Components...
1. The first component is your balance rating. This rating is your average minimum daily balance maintained in your account over the last three (3) month period. Maintaining at least $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 prior to applying for larger loans. This is to show lenders that your business has the ability to debt service. How much money you have going through your account each month does not matter. What does matter is how much is available each day for the last 90 days to pay debt.
3. The third and final 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.
Check your business banking general ledger checking account stateTo determine your current "Bank Rating," review the statements of your business banking general ledger checking account from the past three months. Take note of your average daily bank account balance during this period. By doing so, you can calculate what lenders perceive as your Bank Rating.
Bank Rating Account Balance
Low 3 $100 - $399
Low 4 $1,000 - $3,999
Low 5 $10,000 - $39,999
Mid 3 $400 - $699
Mid 4 $4,000 - $6,999
Mid 5 $40,000 - $69,999
High 3 $700 - $999
High 4 $7,000 - $9,999
High 5 $70,000 - $99,999.
Bank Verification - Lenders Learn Much More About Your Business
In The Digital Age Every Lender Can See Your Business Banking Activity Via A Bank Verification
When you provide the routing and account number for your business bank account, lenders and credit providers can perform a "Bank Verification" to gain access to the following information:
- A comprehensive 36-month summary of deposits, average daily balances, and month-ending balances
- Real-time status of the current balance in the submitted bank account
- Dates indicating the first opening and most recent activity on the business bank account
- Bank ratings for both the account in question and other accounts associated with the company
- Detailed records of any returned debits or checks, including dates and amounts
- Verification of all account signers, including their names, Social Security Numbers, and Driver's License information
In today's digital era, lenders and credit providers have the ability to instantly access data regarding your business banking activity. This allows them to analyze the flow of money through your account on a daily, monthly, and yearly basis, as well as evaluate how much of that money remains with your business.
Your monthly revenue and average daily bank balances have become crucial factors in obtaining approval for no personal guarantee loans and credit lines for your business. They serve as the primary indicator of your business's ability to handle debt.
How to Secure a Low 5 Bank Rating Even Without $10,000
If you lack the required $10,000 for a low 5 rating, consider alternative options such as borrowing from friends or family. You can also explore utilizing personal credit cards or tapping into the equity in your home. When borrowing from friends or family, reassure them that the money will be safely stored in your business checking account and will not be used. You can offer to return the borrowed amount within six (6) months and even propose paying interest. Moreover, we will explore other inventive ways to help you acquire the necessary funds.
Contact Us
Email: admin@vergefive.com
Address:
100 South Garnett St
Henderson NC 27536