Bank Ratings Are Important to Getting Approved

Why Bank Ratings Matter: Your business bank rating is a crucial factor in becoming bankable and getting loan approvals. It reflects your business’s ability to manage cash flow and service debt. Lenders use this rating to gauge the financial health and creditworthiness of your business.

Understanding Bank Ratings:

  1. Balance Rating: This is the average minimum daily balance over a three-month period. For instance, maintaining an average of $10,000 classifies as a “Low 5” rating. This rating is essential as it indicates to lenders your business’s capacity to handle debts.
  2. Bank Rating Cycle: A three-month period is used to assess your bank rating. Consistently maintaining a “Low 5” rating during this period is crucial before applying for larger loans.
  3. Account Management: How you handle your account, especially avoiding NSF (Non-Sufficient Funds) checks, is critical. NSF checks can significantly damage your bank rating.

Bank Rating Levels:

  • Low 3: $100 – $399
  • Mid 3: $400 – $699
  • High 3: $700 – $999
  • 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

Bank Verification in the Digital Age: Lenders can access detailed information about your business banking activities, including deposit summaries, account balances, NSF incidents, and bank ratings. This transparency means that maintaining a healthy bank account is more important than ever.

Achieving a Low 5 Rating: If you’re unable to maintain the $10,000 required for a “Low 5” rating, consider temporary solutions like borrowing from friends, family, or using personal credit resources. However, this money should ideally remain in the business account to maintain the rating.

If You Don’t Have $10,000: While a high bank rating is beneficial for securing larger loans, it doesn’t impact your ability to build strong business credit scores. If you can’t achieve a “Low 5” rating immediately, focus on building your business credit and revisit improving your bank rating when your business’s financial situation improves.

Action Steps:

  1. Assess Your Current Bank Rating: Check your last three months’ bank statements to understand your current rating.
  2. Improve Account Management: Avoid NSF checks and maintain a healthy average daily balance.
  3. Plan for a “Low 5” Rating: Explore ways to increase your average balance to at least $10,000.
  4. Separate Bank Rating from Credit Building: Continue building your business credit scores regardless of your current bank rating.

Remember, a strong bank rating is a key component of your business’s financial health and can significantly impact your ability to secure favorable loans and credit lines.