Is your business bankable? · Credit connector

Is your business bankable?

When assessing the bankability of your business, it's crucial to understand the key factors that lenders consider when determining whether to extend credit. Achieving bankability means having a clear distinction between your personal and business credit while establishing a business entity capable of securing financing independently.

**1. Lender Compliance: The Initial Checkpoint**

The first step in becoming bankable is meeting lender compliance requirements. Lenders utilize sophisticated algorithms to evaluate the risk associated with your business when you apply for a loan. They assess various criteria to determine if your business falls into categories known for higher default rates. Until you meet these compliance standards, your business will be viewed as a higher risk, making it difficult to secure financing.

**2. Business Credit History: Building a Solid Foundation**

A strong business credit history is essential. If your business credit reports show fewer than ten reporting tradelines, you may not have sufficient credit history to be considered bankable. Additionally, if your tradelines only range from $300 to $500, they won’t demonstrate the “Comparable Credit” lenders are looking for. It's important to establish a track record of credit that aligns with the loan amount you are seeking.

**3. Business Credit Scores: Aim for 70 or Higher**

Just as personal credit scores play a significant role in your financial health, business credit scores are equally important. Your business should aim for a credit score of 70 or above, which is comparable to maintaining a personal score of 700. Unlike personal credit, where you might have a grace period for late payments, business credit reports are updated daily. This means that even a slight delay in payment can negatively impact your credit standing.

**4. Business Bank Rating: Financial Stability Matters**

Lenders will also evaluate your business bank rating, which reflects your ability to service debt or cover monthly loan payments. This rating is determined by your average daily balance in your business bank account over the past 90 days. To be considered bankable, you should strive for at least a "Low 5" bank rating. A solid bank rating indicates that your business has the financial capacity to meet repayment obligations.

It's important to note that many small businesses overlook these critical steps, with less than ten percent taking the time to ensure they are bankable before applying for financing. To gain insights into your current standing and learn how to improve your bankability, consider completing a free Business Success Scan. This will provide you with a personalized assessment and action plan to enhance your business's financial profile and readiness for funding.

Take the initiative to understand your bankability and set your business on a path to financial success today!

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