Minimum Credit Score Requirements to Qualify For Business Loans - PowerPoint PPT Presentation

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Minimum Credit Score Requirements to Qualify For Business Loans


Are you applying for a business loan? Here are the minimum credit scores requirement you need to know to qualify for different kinds of business loans. For more information, visit at – PowerPoint PPT presentation

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Title: Minimum Credit Score Requirements to Qualify For Business Loans


  • The process of qualifying for a business loan
    involves many requirements that changes based on
    the loan product you want. Among many factors,
    credit score for loan eligibility is an important
    factor. Credit score is the most crucial factor
    in the loan underwriting process, since it helps
    lenders determine your eligibility and your
  • According to FICO, a FICO credit score comprises
    of these five factors
  • Payment history 35
  • Amount of debt owed 30
  • Age of credit history 15
  • New lines of credit 10
  • Credit mix 10
  • For majority of loan products, the lender will
    partly check your credit score. If youve a good
    credit score, youre more creditworthy and pose a
    less risk to the lender. On the contrary,
    borrowers with poor or bad credit score often
    find it hard to secure business loansor be block
    out of certain loan types completely.

For every lender and loan type, the requirement
of minimum credit score is different. Before
jumping into the business loan application, make
sure to review the minimum credit scores
requirements for the loan type youre applying
foror at least the ranges theyre in.
Technically, theres no minimum credit score
requirement to qualify for a business loan.
However, lenders prefer to review credit scores
for certain loan types. Every business loan
application is calculated separately, and the
decision is made based on different combination
of factors. If borrowers other credentials
conformed or exceed the lenders approval
criterialike annual business revenue or time in
businessthen there is a minimum credit score a
borrower just have in order to qualify for
different business loan types.
To summarize, the stronger your credit score is,
the easier youll be approved for a business
loan. However, credit score is not the only
factor that determines a borrower eligibility for
a given business loan. It also conclude other
factors like loan amounts, loan terms, interest
rates, and repayment schedules. Certainly, a
borrower other credentials will also affect
business loan terms and options, but your
personal credit score is the major factor in
concluding your search for funding.
Credit Score Ranges
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The Basics of Credit Score
There are two types of credit scores a personal
credit score and a business credit score. These
two credit scores types are often independent and
measure different things.
Your Personal Credit Score
Your Business Credit Score
Your Personal Credit Score
For many, credit score means a personal credit
score. A personal credit score is the best
indicator of your financial responsibility. Your
personal credit score is calculated by three
major credit bureaus Equifax, TransUnion, and
Experian. The credit score assigned is pretty
unified and evaluated with the FICO score, which
makes up a few different factors in your credit
profile to come to a number. The personal credit
score ranges from 300 to 850 and a credit score
of 550 is essential in order to qualify for most
types of business loan.
The likely factors involve in the FICO score
calculations are
  • Payment history
  • Credit Volume
  • Length of credit history
  • Number of credit accounts
  • Tax liens, judgments, bankruptcies, collections
  • Hard credit inquiries
  • Card utilization
Your Business Credit Score
Similar to a personal credit score, a business
credit score is a measure of your past
dependability with your business financial
obligations. All major credit bureaus calculate
business credit score and Dun Bradstreet is the
largest and most popular agency who calculate
credit score on a scale from 1-100.
The FICO SBSS (FICO Small Business Service) score
is specific to small businesses being it an
important element of SBA loan application. The
FICO SBSS is like a personal credit score, but
the credit agencies also consider other factors
like your company size, industrys risk factors,
and vendors relationships. This score is
calculated based on public documents and not on
personal information.
If you dont have a business credit score, it
doesnt mean you cant qualify for a business
loan. Most lenders consider personal credit score
over business credit score to evaluate loan
applications, and some even dont require a
business credit score at all. A business credit
score is vital for SBA loans, and bank term loans.
  • Every lender and loan type have different credit
    score requirements and lenders emphasize on
    credit score during the loan underwriting
    process. Some loan types require high credit
    score while others dont. If youre fulfilling
    the minimum credit score requirement, your other
    business credentials need to balance out that
    minimum credit score.
  • Here is an overview of the minimum credit score
    requirements for different types of business
  • 640 Credit Score for SBA Loans
  • 640 700 Credit Score for Bank Term Loans
  • 600 Credit Score for Equipment Financing
  • 550 Credit Score for Short-Term Loans
  • 600 Credit Score for Invoice Financing
Credit Scores Requirements for Different Types of
Business Loans
640 Credit Score For SBA Loans
600 Credit Score for Equipment Financing
640 700 Credit Score for Bank Term Loans
SBA loans are the most popular loan types among
small businesses. These loans are provided by
banks and online lenders and are partially
guaranteed by the US Small Business
Administration (SBA). Based on the loan program
and borrower creditworthiness, the SBA can offer
the larger loan amounts, the lowest interest
rates, and the longer repayment terms. But
getting SBA loans is difficult, since theyre
super competitive. Businesses with the solid
financial profiles can easily secure these loans.
However, SBA supports small businesses and
doesnt have a requirement of a definite credit
score, but solid financials and a credit score of
640 can get you quick approvals on SBA loans.
If your business needs to make big purchases like
equipment, machinery, automobiles, applying for
equipment financing is the most suitable option.
Equipment financing is a collateralized funding,
where lenders can seize and sell your equipment
in case you default on the loan. If youre
looking for less stringent lending requirement,
you can get extended equipment loans since
theyre guaranteed collateral for lenders. In
order to qualify for equipment financing, you
need to have a credit score of at least 600. The
loan terms will depend upon the type of equipment
youre financingits life, the type of industry,
and its general use.
Bank term loans also carry the desirable terms
just like SBA loans. Borrowers with a credit
score of below 700 and 640 can secure larger
loan amounts with longer repayment periods and
lower interest rates. While lending money to
small businesses, traditional banks play blind
bargain by accepting loan applications, since
they needs to ensure theyll be repaid. So, if
your time in business is longer, generating high
annual revenues, steady profitability with
excellent credit score, youll be considered
reliable and will be accepted for approval.
Credit Scores Requirements for Different Types of
Business Loans
600 Credit Score for Invoice Financing
550 Credit Score for Short-Term Loans
Short-term loans are great financing option for
borrowers in need of quick funding. With
short-term loans, you can secure funding up to
250,000, and repayment terms ranging up to 18
months. Another major benefit of short-term loans
is that they pose relatively low risk to the
lender as compare to other forms of financing.
In order to secure a short-term loan, youll
need to have a credit score of 550. As a rule,
the lower your credit score, the higher your
interest rates will be on the loan.
Invoice financing, also known as accounts
receivable (AR) financing, is also a type of
collateralized financing where you get advances
against your businesss outstanding invoices. In
this financing option, your customers are the
risk factor for the lender, because its your
customers invoices that the lender is
collateralizing. In invoice financing
underwriting process, the lender focus more on
your businesss invoices rather than your credit
score. Some invoice financing lenders count on
other factors apart from credit score while
making decisions. Remember, if you opt for
invoice financing, youll not be able to secure
as much capital as you would with another type of
loan. In order to secure invoice financing, you
need to have a credit score of 600.
Financing Options to Strengthen Your Credit Score
If youve a poor credit score, dont worry,
youre not alone. Many small businesses are
struggling with bad credit score. There are a
handful of ways to improve your credit score. For
starters, pay your outstanding bills, and on
time, every time moving forward. If youre unable
to qualify for a loan you want, you still have
many other financing options available. Here are
your best three financing options to help build a
solid credit history and improve existing credit.
A Secured Business Credit Card for all Credit
0 Intro APR Business Credit Card for 620 Credit
Revolving Line of Credit for 550 Credit Scores
A Secured Business Credit Card for all Credit
A responsible use of a business credit card is
one of the best way to build and improve credit
scores. If your credit is terrible and youre
unable to qualify for a credit card, apply for a
secured credit card. A cash security deposit
backs such credit cards, which serves as
collateral and your credit limit. Because of
this cash deposit, the issuer is willing to offer
secured credit cards to borrowers even with poor
credit scores. There are also some secured credit
cards that actually dont have any minimum credit
score requirements. However, some credit cards
require a credit score of 550.
0 Intro APR Business Credit Card for 620 Credit
If your credit score is good but not excellent,
and unable to secure the desired loan, consider
applying for a 0 intro APR business credit card.
With a 0 intro APR business credit card, you can
roll over your credit card payments after
sign-up, until the end of your introductory
period (9-12 months), with no added interest.
After your introductory period is over, a
variable APR sets in at a Prime market rate based
on borrowers creditworthiness. This rate vary
from the market rate, so go over the issuers
terms and conditions thoroughly for the latest
APR information before you make a decision. In
order to secure a 0 intro APR credit card, you
need to have a minimum credit score in the 600s.
If you sensibly use the card during your
introductory periodfull and timely payment of
bills every month and spend within your credit
limit, it can helps build and improve credit
A revolving business line of credit is
best-suited financing option for businesses in
need of regular capital. With a business line of
credit, you can draw the needed fund for any
purpose you need. The best thing is, youll only
pay interest on the amount you use and as long as
you pay in full and on time, you can use your
credit line as often as you need. Borrowers
with fair credit scores are eligible for business
lines of credit. The loan amount and interest
rates will depend upon the borrowers financial
profile. A solid financial profile will secure
higher credit lines with lower interest rates and
vice versa. A business line of credit is most
suitable for startups with limited financial
histories. Also, this funding option can help
those businesses to build their creditsince its
revolving, youll have several opportunities to
confirm that youre a reliable borrower.

The Bottom Line
Credit score is the chief factor for lenders
while evaluating business loan applications.
Lenders use this to measure your financial
responsibility. However, its just one crucial
part of your businesss holistic financial
profile, and there are different minimum credit
score requirement for loan qualification. Look
for the financing options based on your financial
needs to build or rebuild your credit profile, in
order to position your small business for the
best loan options available.
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