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If you are seeking to start or expand a small business, then you are likely considering acquiring funding via a small business loan. Aside from a number of specific requirements you must meet in order to be approved for a small business loan, you must also have a good credit score. But is there a minimum credit score required for approval?
While credit scores are, in fact, a very important factor of consideration for lenders, there might not actually be a minimum credit score required, depending upon what type of loan and the amount of funding you need. Different lenders will require different minimum credit scores, which means if you have difficulty getting approved for a small business loan by one lender, you may have success with another.
What Do Lenders Consider a Good Credit Score?
While lenders will certainly take other factors into consideration, they still like to see a credit score that is 550 or higher. A credit score of 550 is within the ballpark of a good credit score, and anything higher is, of course, getting more favorable and enables you to be viewed as less of a risk.
What Credit Scores Do Lenders Look At For a Small Business Loan?
Lenders will look at both your personal credit score, and your business credit score if you already have an existing business. Your personal credit score is provided to lenders by three credit reporting bureaus. Each bureau may offer a slightly different take on your score, but typically they are all within a few points of each other. Still, you should check your own personal credit scores on occasion to see if there are any errors or concerns you need to address in order to ensure a good credit score.
Your business credit score represents your business’ financial history, and is calculated differently than your personal credit score. Dun and Bradstreet is one of the major agencies that calculates business credit scores, on a scale of 1-100.
It is not always necessary to have a business credit score when applying for a small business loan, but if you do have one, you’ll want it to be as close to 100 as possible.
Keep in mind that other types of small business loans, such as SBA loans and bank loans, may have stricter requirements and a higher minimum credit score, such as 640 and higher. Do your research to see which type of lender might be right for you based on your current credit score. Start by comparing business loan providers, such as Kabbage vs OnDeck, and see which service is best for you.