Business financing is a challenge for many businesses. Don’t make it harder to get business financing with a bad bank credit score. We show you how to fix it.

Business Financing Can Be a Challenge If You Damage Your Bank Credit Score

Of course you want business financing. Every business owner does. But there’s a little-known number called a bank credit rating. And it may be making it harder for you to get money.

Your Bank Credit Rating – What’s it All About?

Did you know there are many ways you can ravage your bank credit rating? It is, regrettably, rather simple to run a power saw through your bank rating.

However prior to going any further, do you understand the distinction between bank credit ratings and company credit?

Company credit is the full and complete amount of money that your company can get from all types of creditors. That means the banking system, credit unions, credit card companies, and renting companies. And it also means providers, under what’s called trade credit or vendor credit or trade lines. That is, the vendor credit tier.

A bank credit score, on the other hand, is a measure of the sum total of borrowing capability which a company can get from the banking system only. 

Bank Credit Ratings Explained

A company can get more company credit rapidly, so long as it has at the very least one financial institution reference and an average daily account balance of at the very least $10,000 for the most recent three month period. This setup will generate a bank credit score of a Low-5. So this means it is an Adjusted Debt Balance of from $5,000 to $30,000.

A lower score, like a High-4, or balance of $7,000 to $9,999 will not instantly turn down the small business’s loan application. Nonetheless, it will slow down the approval process.

What is a Bank Rating?

A bank rating is a measure of the average minimum balance as maintained in a business bank account over a three month long period. Thus a $10,000 balance| will rank as a Low-5, a $5,000 balance will rank as a Mid-4. So a $999 balance will rate as a High-3, and so on.

A company’s principal objective ought to always be to maintain a minimum Low-5 bank score (or, an average $10,000 balance) for at the very least three months. This is because, without at least a Low-5 rating, most banks will operate under the presumption that the business has little to no ability to repay a loan or a business line of credit.

However there is one thing to keep in mind: you will never really see this number. The financial institution will just keep this number in its back pocket.

The Bank Score Ranges

The numbers work out to the following ranges:

To get a High-5 score, your company will need to have an account balance of $70,000 to $99,999. For a Mid-5 rating, your company has to have an account balance of $40,000 to $69,999. And for a Low-5 score, your company has to keep an account balance of $10,000 to $39,000. So your business needs this level bank score or better so as to get a bank loan.

For a High-4 rating, your company needs to have an account balance of $7,000 to $9,999. And for a Mid-4 rating, your business must have an account balance of $4,000 to $6,999. So for a Low-4 rating, your business will need to have an account balance of $1,000 to $3,999.

Ruining Your Bank Score

And now, without further ado, below are 7 ways you can leave your bank score in tatters.

1st Way to Ruin Your Bank Credit and Miss Out on Business Financing

Banks are extremely motivated to lend to a company with regular deposits. And a business owner must also make regular deposits in order to maintain a positive bank score. The business owner must make several consistent deposits, more than the withdrawals they are making, in order to have and preserve a great bank rating. If they can do that, then they will have a great bank credit score.

Consistency is the hobgoblin of little minds, right? So be a free spirit!

2nd Way to Destroy Your Bank Credit 

Do not let your company show a positive cash flow. The money coming in and leaving your firm’s bank account should reflect a positive free cash flow.

A positive free cash flow is the quantity of income left over after a firm has paid all of its expenses. According to Investopedia, it “represents the cash a company can generate after required investment to maintain or expand its asset base. It is a measurement of a company’s financial performance and health.”

When an account shows a positive cash flow it shows your small business is generating more income than is used to run the business. That means the bank will feel your company can pay its bills.

So if you truly want to damage your bank score, purchase whatever’s expensive for your small business so your expenditures outstrip your profits. Doesn’t every manufacturing facility deserve plush carpeting in the loading dock?

Check out our professional research on bank ratings, the little-known reason why you will – or won’t – get a get a bank loan for your business.

3rd Way to Damage Your Bank Credit Score and Miss Out on Business Financing

To add to #4, do not include overdraft protection to your bank account as soon as possible, to avoid NSFs. Why bother thinking ahead or planning for the future? Everything is going to be excellent forever, right?

Writing checks insufficient funds (NSFs) is a sure way to ruin your bank rating.

4th Way to Damage Your Bank Credit Score

Never handle your bank account responsibly. This means that your small business ought to not avoid writing non-sufficient funds (NSF) checks at all costs, because those annihilate bank scores. Non-sufficient-funds checks are something which no small business can afford to let happen.

Balancing checkbooks and accounts is so boring anyway. You’ve got adequate cash without even making sure, right?

5th Way to Ruin Your Bank Credit Score and Miss Out on Business Financing

To go along with #6, do not make certain that each and every credit bureau and trade credit vendor likewise lists the business name and address the precise same way. This is every keeper of financial records, revenue and sales taxes, web addresses and e-mail addresses, directory assistance, etc.

No lending institution is going to stop to consider the myriad manners in which a business may be listed, when they check out the business’s creditworthiness. Thus if they are not able to discover what they require easily, they will either deny an application or it won’t be reported to a business credit reporting agency such as Experian, Equifax or Dun & Bradstreet.

Therefore, if they are unable to discover what they need conveniently, they will just deny the application. So see to it your documents are a mess!

6th Way to Damage Your Bank Credit 

Don’t bother to guarantee that your business bank accounts are reported precisely the same way as every one of your business documents are, and also with the precise same physical address (no post office box) and phone number. Sow confusion in this area by changing one and not another, or not remedying an error if there is one.

Check out our professional research on bank ratings, the little-known reason why you will – or won’t – get a get a bank loan for your business.

7th Way to Ruin Your Bank Credit Rating and Miss Out on Business Financing

Don’t maintain a minimum balance for a minimum of three months. Since every bank rating cycle is based on the previous three months, a consistently seesawing balance should damage your bank score.

Destroy Your Business’s Bank Score – Although You Will Never See It

You, the entrepreneur must never make consistent deposits. And these deposits must never be more than the withdrawals you are making, in order to destroy your bank credit rating.

If you can do these things, then your business will have a horrible bank credit score. And, consequently, a bad bank credit rating means your firm is far less likely to get business loans.

Just Kidding: Of Course We Don’t Truly Want You to Ruin Your Business’s Bank Credit Rating!

So, where do you go from here?

The 1st Great Way to Rescue Your Bank Credit Score and Get Business Financing

Maybe the simplest way to achieve and maintain a good bank credit score is to deposit at least $10,000 into your business bank account and maintain it there for as long as a half year. While you will still need to make consistent deposits, this one easy step will help in three ways. One, you will have kept a good minimum balance for at the very least three months. Two, you will more than likely not overdraw with such a good balance. And 3, you will be at the magic minimum for a Low-5 bank credit score. Therefore you will be dealing with our #4 and #7, above.

And you might even be able to get around our #3. Yet we still highly recommend overdraft protection.

The 2nd Wonderful Way to Rescue Your Bank Credit Rating and Get Business Financing

A 2nd requirement is to ensure your small business account information are consistent across the board, all over. While it might take some work order to make sure everything is right, you will be dealing with our #5 as well as #6, above.

The 3rd Great Way to Rescue Your Bank Credit Score and Get Business Financing

A third requirement is to make consistent deposits, as well as make certain they are greater than the quantities you are taking out every month. This will take care of our #1 as well as #2 smoothly.

Make it Easier to Get Business Financing With a Great Bank Credit Score: Takeaways

Your bank score is not to be trifled with. Although the financial institutions maintain a secret concerning them, failing to keep your bank credit rating high will make it a whole lot harder to do well in business.

Check out our professional research on bank ratings, the little-known reason why you will – or won’t – get a get a bank loan for your business.