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Besties with your Bank

Business Funding Hack: Most business owners have no idea that their business has its own bank rating.

Well if you didn't know, now you do! Become besties with the bank that your business bank account is with.

Banks rate your business. When applying for credit and loans with banks, this rating determines how much the business will get.

To get an approval for financing, often your business will need a bank rating of “Low 5” or better. This rating is the average minimum balance kept in the business bank account over a three (3) month period. A $10,000 balance will rate as “Low 5”, $5,000 rates as “Mid 4”, $999 rates as “High 3”, and so on.

The main goal should be to maintain a minimum “Low 5” bank rating ($10,000) for at least 3 months. Unfortunately, without at least a “Low 5” rating, most banks assume the business cannot repay a loan or a line of credit.

An easy way to keep track of your financial goals is to use a monthly finance journal like this one we found on Amazon:

For the best rating, make certain you don’t have regular or common non-sufficient funds charges on your business bank account. And try to set a goal to keep your average daily account balance as high as possible over a 3 month period. Keeping an average balance of $10,000 or higher is crucial to securing the highest bank rating. So keep as much money in your account as you can, to increase your chances of obtaining bank financing.

It is also very important that a business show a positive cash flow. Positive cash flow is the amount of revenue left over after the company has paid all its expenses. When the account shows a positive cash flow it indicates that the business is generating more revenue than it takes to run the company.

A business owner must also make regular deposits to maintain a positive bank rating. Banks prefer consistent deposits coming into the business bank account. So it is vital that a business owner make a lot of consistent deposits. These must be more than the withdrawals

they are making.

Bank credit is not only based on monthly deposits, balance rating, and check history. It also includes the age of the account, and the bank products the business uses. It also includes any savings account or investments the business has.

A seasoned bank account shows stability and longevity in the eyes of lenders. Keeping a healthy and long standing relationship with a bank is also crucial. Lenders considering loaning a business money will prefer a good, stable, relationship with a bank that reflects longevity.

Build the best bank rating you can to radically increase your chances of getting approval for your next funding goal. Stay funded, friends!

The finance journal listed in this article can be found here:

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