Key Success Element #4 - Become Bankable
Becoming Bankable: The Four-Leg Foundation Your Business Needs
When your business becomes bankable, that means you have separated personal credit from business credit and established a business entity that can stand on its' own for financing. Becoming bankable is a table with four legs — Lender Compliance, Business Credit History, Business Credit Scores, and Business Bank Rating — and every leg must hold weight for a lender to approve your loan.
Run Your Free Business Success Scan NowThe Four Legs Of Becoming Bankable
Each leg must be in place for your business to be considered low-risk by lenders:
Lender Compliance — The Algorithm Gatekeeper
Lender compliance is a series of small items that a lender's underwriting computer immediately checks when you apply for a business loan. Lenders are simply looking to see if your business falls into known higher rates of default. Until Lender Compliance is completed, your business will be considered high risk. Most lenders sell their loan portfolios to secondary market investors, and those investors prefer to buy low risk loan packages.
Business Credit History — AKA Comparable Credit
If you look at your business credit reports and do not see at least 10 reporting tradelines, then you have too little business credit history to be considered bankable. Also, if you only have $300 to $500 reporting tradelines, then you do not have "Comparable Credit". Lenders want to see that you have tradeline credit history of a comparable size to what you are asking them to approve.
Business Credit Scores — Maintain 70+
Just as 700 or higher personal credit scores matter, your business must have business credit scores of 70 or above to become bankable — the equivalent of having 700 scores personally. Unlike personal credit, there is no 30 day grace period with business credit. Business credit tradelines report "to the day", meaning if you pay even 10 days late you will be reported as "late".
Business Bank Rating — Maintain Low 5+
Lenders want to see that your business has the ability to debt service, or cover the monthly payment for the loan amount you are requesting. For this they look at your business bank rating, which tells them if you have the money to make their payment or if you are more likely to default. Bank rating is based on your average daily balance in your business general ledger bank account for the prior 90 days. Having at least a "Low 5" Bank Rating is critical to becoming bankable.
Why Preparation Matters
Loan underwriting approvals are done by computer algorithms. Via APIs, they can instantly check if your business is bankable or not — there is no human review to appeal to before that first automated pass. Building all four legs before you apply is what keeps your business out of the high-risk pile.
The Bottom Line
Becoming bankable means your business can stand on its' own, separate from your personal credit. By completing the free Business Success Scan you will see where your business stands right now in becoming bankable, and you will know exactly what to do to become bankable in the very near future.
Find out where your business stands on all four legs of becoming bankable.
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