What is a good credit score to get a business loan?
Although every lending institution has its own business loan requirements, which also depend on the type and amount of loan you are seeking, many will require a minimum credit score to consider the eligibility and trustworthiness of a borrower.
Each loan application is evaluated on its own basis, and each borrower is approved or denied depending on a combination of factors. Those include the number of years in business, the size of the enterprise, vendor relationships, annual revenue, steady profitability, and other criteria.
Business and Personal Credit Scores
The business credit score is separate from your personal credit score, and a potential lender will look at both, but the business one tracks the financial history and reliability specifically of your business. Most small businesses do not have a separate business credit score, and many lenders may not require one unless you are applying for an SBA loan or a longer-term bank loan.
Personal credit scores usually range between 300 and 850. To qualify for most small short-term business loans, you likely need a credit score of at least 550 but preferably in the 700s. The lower your credit score, the higher the interest rate will be.
Building Your Credit Score
You can improve your credit score by paying down existing balances and always getting your payments in on time every time. Newer businesses can start with a business credit card or a business line of credit, both of which are easier to secure than a loan.
0% Intro APR Business Credit Card
You can roll over the payments from month to month for a specified amount of time with no added interest. After the interest-free months, a variable APR is set at a rate that depends on your creditworthiness.
Business Line of Credit
A business line of credit gives flexible financing on a regular basis, and you only pay on the amount you use. If you repay on time, you can return to your line of credit as often as necessary.
Who will be accepted for a loan?
Only the borrowers that lenders deem the most reliable will be accepted because lenders want to loan money only to those who are capable of repaying on time and are dependable with their financial obligations. With a credit score being a measure of a business owner’s debt history, it is a good way to show that you are a worthwhile and trustworthy candidate.