Average Daily Balance
The average amount held in a business bank account across a period, typically a month, used by lenders to gauge cash flow stability when reviewing bank statements.
Average daily balance is calculated by adding each day’s ending balance over the period and dividing by the number of days, which smooths out single-day spikes or dips and gives a more representative picture of typical cash on hand.
It’s a common metric in bank-statement underwriting, especially for merchant cash advances and other alternative financing, where lenders may not require formal financial statements and instead lean on raw bank activity to gauge affordability.
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