What is a risk grade and how do lenders set mine?
A risk grade is the internal rating a lender puts on your business, driving your pricing, how much they will lend and who inside the bank can approve it. Most lenders run a scorecard that blends financial ratios with credit file conduct and industry data. The grade itself is rarely shown to you. You feel it in the rate you are offered and in the conditions stapled to the approval.
What feeds the grade
Scorecards differ by lender, but the ingredients are broadly the same across the market.
- Gearing and how much debt the balance sheet already carries
- Interest cover and debt service coverage from the financials
- Trading history, including how steady the earnings have been
- Credit file conduct, defaults, enquiries and any ATO arrangement
- Industry, security type and how much of the value you are borrowing
Concentration matters too. One customer producing most of your revenue usually pulls the grade down no matter how good the numbers look.
How a business moves up a grade
The grade gets reviewed, often annually, so it can move both ways. What tends to help is unglamorous. Lodge returns on time, clear ATO arrears, keep the trading account out of dishonours and reduce debt where you can rather than rolling it. Offering property security can shift the grade on its own. Where the numbers understate the business, an accountant’s letter setting out add backs and one off costs gives credit something to work with. Different lenders weight these differently, which is where a broker earns their keep.
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Last updated 15th July 2026. Reviewed by Authorised Credit Representative 554584 of Australian Credit Licence 414426.