As a business owner one of the important decisions you will need to make is deciding where to set up your small business bank accounts. Once you select the banks or financial institutions that fit the needs of your business than you should focus on establishing bank credit.
Bank credit is different from business credit because the criteria are based on factors relating to your business bank accounts. This includes your balance rating, bank rating and NSF check history to name a few.
Did you notice that selecting banks or financial institutions are pluralized? The reason is you should definitely consider establishing multiple banking relationships rather than sticking to just one bank account.
Remember when banks deciding to reduce and in most cases cut the business lines of credit for thousands of small business owners across the country?
The lesson to be learned was don’t depend on just one single bank or financial institution to build all your bank credit with.
Would you rather have one business line of credit with one bank for $150k or would you be much better off and safer with three business lines of credit of $50k each at three separate banks or financial institutions?
Now that we got that out of the way let’s go over what your overall bank credit consists of.
When you first open your small business bank account make sure all the information you supply match exactly with the business name and address that is listed on your Federal Tax ID paperwork, articles of incorporation and legal paperwork you have filed with the State.
There must not be any discrepancies because this can also affect how your business information is reported to the business credit bureaus.
When you open an account for your business keep it open and don’t jump around. This is why you should do your due diligence because the age of your bank account plays a big role in the eyes of lenders.
The longer you have a business account at a particular bank the greater the potential for obtaining larger loans or lines of credit. Now, this is just one component because the next one is far more powerful.
In a nutshell your bank rating determines how your business manages its cash flow. When you apply for a loan or line of credit lenders use this to determine whether or not your business can handle the extra debt and expense.
While I won’t get into the actual numbers I suggest that you shoot for a low five rating and maintain it for at least three months prior to applying.
Remember, even though there are laws and regulations that govern the activities of banks, credit unions and savings loans not all of them are the same neither do they specialize in the same areas of finance!