"Cracking the Bank Rating Algorithm: Insider Tips for Success"

Join host Rita Owens in this eye-opening episode of the FundHer Ready Podcast, titled "Decoding the Bank Rating Algorithm: Insider Tips for Success." Dive deep into the world of bank ratings as Rita unveils the secrets behind achieving a positive rating for your business. Learn about the crucial factors banks consider and gain practical insights on maintaining accuracy across platforms. Whether you're a budding entrepreneur or an experienced business owner, this episode is packed with valuable information to help you navigate the intricacies of bank ratings and maximize your financial success. Tune in now and unlock the key to a positive bank rating with Rita Owens on the FundHer Ready Podcast!

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Transcript

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Hey Bizbesties. So we're back with another episode and I can't wait to dive in because in today's episode we're going to be focusing on the essential topic of how to boost your business's bank rating so that you can start, grow and scale faster. So let's go ahead and jump right in. All right? So before we dive into the specifics right, let's go ahead and explore why your business bank rating is crucial for your business's financial success. Now your business bank rating determines your credit worthiness when it comes to the lenders and financial institutions that you're seeking funding from. It also impacts your ability to secure loans and obtain favorable interest rates and it also impacts your ability to access financial resources. Having a positive bank rating not only opens the doors to financing, but it also helps to build trust and credibility with potential partners and investors. It's a critical factor that can make or break your business's financial journey. And so that is why we're talking about it today because not a lot of people talk about bank rating when it comes to building your business credit and when it comes to being able to secure funding for your business. Now, the primary objective of any company should be to maintain a minimum low five bank rating or at least an average balance of at least$10,000 for a minimum of three months. Now that's called a low five bank rating. Having an average balance of $10,000 for an average of three months is where you want to be, especially if you're looking to secure funding from the banks. Now this rating is vital because without at least a low five score, most financial institutions are going to assume that your business lacks the ability to be able to repay the loan or a business line of credit. So again, that's why it's really important for you to make sure that you strive to have at least$10,000 in your bank for an average of three months. Okay? So let's go ahead and take a look now at your bank rating and what that means for your business's ability to secure loans. Now I mentioned to you the low five bank rating, but there's a scale. So when we look at the scale, we're going to start with the high five rating. Now in order to achieve a high five rating, your business needs to maintain an account balance between $70,000 and $99,999. So just below $100,000, that's going to get you a high five rating. The next tier is going to be the mid five rating. And for the mid five rating score, your business should hold an account balance ranging from forty thousand dollars to sixty nine thousand, nine hundred and ninety nine dollars. So just shy of $70,000 next is going to be that low five rating, and that's the low five that I mentioned at the top of the show. Now in order to secure that, you're going to need to make sure that that balance is ten thousand dollars to thirty nine thousand, nine hundred and ninety nine dollars. So just shy of $40,000. Now again, just to reiterate, this level of bank rating or higher is essential to increase your chances of obtaining a bank loan. And additionally, there are ratings for ranges of the high four, mid four, and low four categories as well, which have lower account balance requirements. But I'm going to just stop there at the low five because again, that is where you want to be. If you're looking to secure funding for your business. It's really important that you take the time to understand the rating that I mentioned because these are going to directly impact your eligibility for bank loans and other financial opportunities. Remember, we've talked about the importance of having good credit, right, both personal and business credit. But those bank rating scores are going to be crucial critical to your success in building out your business credit and securing funding as well. So let's think of that as being something that is equally as important. So now that we have that down, let's go ahead and move right into the step by step guide on how to boost your bank rating. Okay? So step number one has to do with maintaining a minimum balance. Now we just talked about that. The very first step is to make sure that you maintain a minimum balance in your business bank account for at least three months of $10,000. Now this means ensuring that your account consistently holds that $10,000. And what that does is that it demonstrates the stability and the financial responsibility of your business to the bank. Now that leads us into step number two, which is consistent reporting. Now this is going to be a theme that you hear constantly because a lot of business owners get this wrong when it comes to building business credit. You want to make sure that all your credit reports are reporting accurately. Well, the same thing goes for your bank account. You want to make sure that all of the information that you've provided to your banking institutions across the board are all the same. Now, many people have multiple bank accounts and that's perfectly fine. But you want to make sure that that bank account information is also matching what's on your business credit reports. It's very important to do that because you want to make sure that the banks are able to accurately check your business credit reports when you're applying for funding. You want to make sure that you have consistency in your reporting. You want to make sure that you avoid any types of confusion at all cost and that everything is accurate. Accuracy is key, okay? That is the representation of your business. And you want to make sure that your financial profile that you have is always accurate. Now, what are some of the things that you want to make sure are accurate? Well, just like your business credit reports, you want to make sure that the actual physical address of your business, whether you're using a virtual address or not, is reporting the same. Because remember, when it comes to your business credit, they are going to go off the name of your business as well as the address of your business. So that address is super important and you want to always make sure that that address is exactly the same on all of your paperwork that includes your bank account. You also want to make sure that your contact information is accurate across all of the platforms, across all of your banks, across your business credit reports, that everything is accurate. And then when you're filling out your credit applications, you want to make sure that you're consistently putting the same information on your credit applications as well. So this leads me to step number three, which is making sure that everything is uniform across all of the credit agencies. You want to make sure that you double check every credit agency and also every vendor trade account that you have. You want to make sure that the name and the address is consistent across those. This is really important, especially if your business has changed locations. Rule of thumb is you want to make sure that your business address is the same as the address in which you've registered your business. So when you register your business for the Secretary of State, you're going to provide them with an address. Make sure that address is the same across the board. Make sure the spelling of your business's name is the same across the board. Those little things, those little details are really important and can cost you thousands of dollars. So take the time out to make sure that those things are accurate. Now, some of the major credit agencies that you want to make sure that you check with are going to be Experian, Equifax Dun and Brad Street Credit Safe as well. Those are some of the top business credit reporting agencies. So make sure that those reports are consistent across all of those platforms and that's going to strengthen your credit worthiness and prevent any discrepancies from happening that may negatively impact your bank rating. Which leads us into step number four, which is responsible banking practices. You guys, you have to make sure that you're practicing responsible banking by avoiding things like Insufficient funds or NSF, non sufficient funds, bounce checks, things like that. You want to make sure that your business has sufficient funds in your business bank account at all times. You want to make sure that you have money in that account at all times to cover all of your expenses, all of those outgoing payments, any checks, any automated transaction NSF checks can be detrimental to your bank rating and should be avoided at all costs. Now, I'm going to say that again, you have to avoid NSF checks that is going to be the downfall of your bank rating score. Now, ways that you can avoid that is by doing simple tasks like keeping careful track of your account balances, making sure to reconcile your transactions regularly so that you can maintain a clean financial record. Now, if this is something that's not in your wheelhouse, right, something that you don't like to do, you're not a numbers person, you don't like spreadsheets, you don't like to sit in front of the computer, you weren't good at math. I would suggest making sure that you have an accountant or someone that can reconcile your transactions for you. I will tell you that even if you don't have a full time accountant, you can hire people on fiverr and upwork who will do the accounting for you. So there are people who can fit within your budget to make sure that those things get done. But you want to make sure that you allocate some funds to making sure that you have clean financial records. Very important. This leads me into step number five on how you can avoid NSFs. Now, the way that you can avoid that is by adding what's called overdraft protection. Overdraft protection is a service provided by the bank that allows you to link another account or obtain a line of credit to cover any potential shortfalls in your business bank account. Super helpful, especially if you're somebody who isn't that great with keeping up with your transactions. You want to make sure that you at least have that safety net. Now, by planning ahead and having safeguards in place like that, you can actually avoid NSF situations. And you'll also demonstrate responsible financial management to the lenders. Again, very important. You got to keep those records clean. The next step that I want to talk about is positive cash flow. Now, you want to aim for positive cash flow by ensuring that your business generates more revenue than it uses to cover expenses. What does that mean? You got to make more money than what you're spending, okay? This means carefully managing your income and expenses to maintain a healthy financial position. For example, if your monthly revenue is $10,000 and your expenses are $8,000, then you have a positive cash flow of $2,000. A positive cash flow indicates that your business has the ability to manage its financial obligations and positively influences your bank rating. Now, remember, we are trying to keep that bank rating at minimum a low five. So you want to make sure that you're maintaining that $10,000 monthly average for the three months, okay? So let's not forget that that is goal for us. The other thing that you want to make sure is that you have regular deposits in your bank account. Don't just open up your business bank account and not have any money going in there, right? We want to have transactions happening. We want to have those deposits. Now, what you're going to do is you're going to make regular deposits into your business bank account. And you're going to make those deposits in a way that exceeds your withdrawals. So what does that mean? You're putting more money into your bank account than you are taking out. Now, consistency in deposits showcases your business's stability and commitment to financial responsibility. So I want you to aim to make frequent deposits, ideally on a set schedule, to demonstrate steady cash flow and consistent revenue generation. For example, if your business receives payments from a client or clients on a weekly basis, I want you to ensure that you're making those corresponding deposits into your bank account promptly. Regular deposits not only contribute to a positive bank rating, but it also helps to build a strong banking relationship based on trust and reliability with your bankers. Now, that's very important because as we've talked about in previous episodes, making sure that you have a business banking relationship can be the key to you unlocking the door to thousands and hundreds of thousands of dollars worth of funding for your business. Just like in life, it's not about what you know, but it's about who you know. And that person that you know and that you build that relationship with in the bank can be the key to the success of your business. So you're going to want to make sure that you are building a rapport with your banker, that you are utilizing the products and services of the bank, and that you are nurturing that banking relationship by making sure that you are making your deposits that you are keeping track of all of your finances that you are reconciling those finances that you are making sure that you avoid things that can cause you to get negative bank ratings. That is going to be the key for you to secure hundreds of thousands of dollars worth of business funding for your business. All right, so now it's time to wrap up. But I want you to remember that building and maintaining a strong business credit rating is an ongoing process. It's not an overnight process. Now, I know that there's some of you out there who are like, how in the world am I going to be able to secure $10,000 in order to make sure that I maintain a low five bank rating when I'm just starting out in business? Now, I don't want you to get discouraged because there's definitely creative ways that you can secure that funding that you need or secure that money that you need in order to put into your business bank account so that you can have that low five bank rating. And that includes things like borrowing temporarily from family or friends. That includes selling products and services to secure that $10,000. That includes maybe funding your bank account with your credit card. There are some banks that will allow you to directly fund your bank account with your credit cards. Again, there are so many different creative ways, so do not give up. If you're a brand new business owner, there are definitely ways for you to be able to do that. Now, I'm going to leave in the show notes information on how you can get more information about my community, where we talk about things like business credit, business funding, how to leverage funding, and all different sorts of creative ways that you can use in order to get your business off the ground. Because, again, the goal is to help you secure funding so that you can start, grow and scale your business faster. Now, that's all for today, you guys. I'm so happy that you were able to join me. I hope that you found this episode valuable. I hope that you took a lot of notes, and I will see you on the next episode.