Every individual’s bank statement provides a cyclic view of all their transactions. The transactions undertaken by individuals include inflows, outflows, transactions, debit card payments, interest earned, bank service fees, with all other installments which they are regularly paying. Lenders analyze an individual’s transaction frequency to calculate the individual’s ability to pay back the loan as per schedule. Analyzing bank statements can support you with crucial financial information when an individual asset for a loan.
This process is to determine the applicant’s eligibility for a business loan or any other loan you applied for business. Lending might be a risky proposal by an inefficient individual, thus lenders must calculate the plus and minus of every loan applicant. To calculate your creditworthiness that lenders initiate to analyze bank statement before the loan approval. It is said that Bank statement analysis is the wise way to estimate individual’s creditworthiness. You can have a clear explanation of how expert bank statement analysis can make your lending process and diminish risks.
What is a Bank statement?
A bank statement has clarification of an account holder’s cash deposits and credits within a set period. The bank’s transacting history of the account holder is commonly regarded as acceptable documentation for finding the financial stability of the account holder. To make this possible, a bank statement incurs all sources of an individual’s revenue, withdrawals, expenditures, credit card payments, overdraft payments, etc., from the authorized bank statement. The analyze bank statement process is also performed with commercial firms and the individual person who applier’s for any kind of loan. A bank statement shows all needed information for the estimation purpose before loan approval or to legalize economic business.
Bank statement analysis and significance
The appraisal, breakdown, and validation of a bank statement process are known as bank statement analysis. There are different reasons and requirements for conducting an analysis. It is commonly practiced by retailers and various other commercial banking service providers, financial institutions, investment firms, and auditing companies. The major purpose of Bank statement analyses within commercial and retail banking institutions is to evaluate every borrower’s creditworthiness by comparing all their transactions with the source of information obtained. For bank statement analysis, institutions fetch data sources from GST filings or income tax and various other financial reports. Some of the most significant purposes of bank statement analysis are as follows:
Determine Creditworthiness
Yielding loans make up the greater part of the role of the financial institution’s operation. All the revenue statements get calculated for all lending processes for commercial or retail banking, an NBFC, or another form of business entity financial needs. Financial institutions like banks perform BSA before lending financial aid. This process is done through the customer’s credit score obtained from the best bank statement analysis software to ensure that the loan lender can repay on time.
Identify Red Flags:
The most reliable use of the BSA software tool is to find any red flags. Usually, a red flag appears when you process transactions like over-limit cash withdrawals and high cash deposits, overdraft out of limits, frequent negative balances, and cross-verification and bounced checks. This kind of transaction will result in a red flag with the individual account. With the result of BSA software to analyze bank statement, you can easily identify such red flags.
Fraud Checks:
The tool will support organizations when they suspect fraudulent activities within the bank statement. Executing bank statement analysis before lender bank process will provide financial guard to merchants or other counterparties. For example, a continuous string of transactions with huge amount transactions from abroad or extended cash deposits/withdrawals from individuals account or business account through ATM can be suspected as fraud. This advantage of BSA software also spots frauds with the support of further bank statement analysis aids.
Derive Patterns:
Bank statement helps discover the bank activity patterns of an individual account holder and a business entity. Analyze bank statement process is used to predict and calculate the average of withdrawals, bank deposits, overdrafts. Various Other important usages of Bank Statement Analysis involve fetching the address and other information of the lenders. You can also process various other calculations that Benefit with cost ratio analysis, cash assets, cash flow, credit limits, etc.
How do lenders use BSA towards business firms?
With a bank statement analysis, you can find a cash flow cycle that dictates the goods status or service revenue with the ongoing operations in a business. Through BSA software, a financial institute can predict corporate growth, loan repayments, and profit generation within an individual account or business entity. As a lender, the first thing you must ask is how you perform insight fund transactions of your firm. And for that real-time insight of bank statements, lenders depend on bank statement analysis for effectiveness.
Cash Balance
The analysis report shows either a positive or negative cash balance. If positive, then it indicates the funds available within your account. With this, a lender finds the success rate of the applicant’s financial flow. You can get identified as responsible borrower when you maintain a positive cash balance. If the cash gets inversed and you result with a negative status, you cannot approach for loans until you maintain your account stability.
Deposits
It is must to pay frequent attention to your account’s recurring deposit sources when you are in need for loan process. Your recurring deposits represent stable sources of fund inflow of your account. This is considered the profitability of the lending institution, and you can satisfy the conditions with continuous revenue streams. This cash flow is calculated based on your commercial transactions, which indicates your large deposits within your individual account or company’s bank statements. You can suggest making continuous and stable transactions within your account without leaving any negative transactions.
It is better to avoid large withdrawals from your bank account before applying for a bank loan. If you do so, it might end with a red flag at the BSA software. Maintain proper payments with a credit card and various other debts on your account.
Bottom line:
BSA software takes your bank statement analysis process to the next level that saving most of your time and resulting with accurate predictions. You can simplify your money lending process when you stay updated with BSA software results.