Bank statement analysis · ADB
Average daily balance (ADB) in business lending
Last updated · Kaaj editorial team
Average daily balance (ADB) is the average amount in a bank account across a period: add up the balance at the end of every day and divide by the number of days. In business lending, ADB shows how much cash cushion a borrower keeps day to day, which a single month-end balance can hide.
How to calculate average daily balance
- Take the ending balance for every calendar day in the period, carrying the prior day's balance forward on days with no transactions.
- Add the daily balances together.
- Divide by the number of days in the period. Many lenders calculate ADB per month and then average the months.
Why lenders use ADB
- Liquidity: how much cash the business holds on a typical day, not only after a big deposit
- Repayment capacity for daily or weekly payments, common in MCA and short-term lending
- Volatility: a low ADB with a high month-end balance can signal window dressing before applying
- Trend: falling ADB across months often comes before NSFs and missed payments
ADB vs. ending balance vs. credit card ADB
Ending balance is one day's snapshot; ADB covers every day. Credit card issuers also use an average daily balance method to calculate interest, which is a different use of the same arithmetic. In underwriting, ADB is a cash-flow and liquidity measure.
ADB example
A simplified 30-day month.
Frequently asked questions
What is a good average daily balance for a business loan?
There is no universal number. Lenders compare ADB with the proposed payment and monthly revenue; many look for an ADB that covers several payments and stays stable or rising across months.
How is ADB different from average monthly balance?
ADB averages every day's ending balance. An average of month-end balances uses only one day per month and can miss mid-month lows.
Do negative balance days affect ADB?
Yes. Negative days pull the average down, and lenders usually count them separately as a risk signal alongside NSFs and overdrafts.
Can ADB be calculated automatically from PDF statements?
Yes, when the tool reads every transaction and daily balance correctly. Kaaj analyzes balances, NSFs, overdrafts, and negative days from messy multi-bank PDFs.