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What’s a Good Credit Score for a Small Business Loan?



What’s a Good Credit Score for a Small Business Loan?

Do you know what your business credit score is? No, not your personal score – your business score. Unfortunately, many small business owners are not aware of the importance of building their business credit score.

Even if you do not anticipate the need to borrow money for your small business, it is still important to start building your business credit score now.

Rania Succar, head of QuickBooks Capital, explains why your business credit score matters:

“More than half of small businesses have not built a business credit score. And when you go to borrow, that can really hurt you in terms of what you can get.”

What is a Good Credit Score?

Unlike personal credit scores which are calculated in a uniform manner, each business credit score has a different range and uses different criteria.

Business credit scores can be used to decide how safe it is to extend credit to customers or check the stability of vendors. Here are some guidelines for a good credit score for the above types:

  • D&B PAYDEX: Low risk 80-100
  • Experian Intelliscore PlusSM: Low risk 76-100
  • FICO SBSS: 160+
  • Personal credit scores: Good 700-749 / Excellent 750+

To qualify for a business loan, most lenders require a minimum 550+ personal credit score.

SBA Loan:

Small businesses are pre-screened for SBA Loans using the FICO SBSS Score. The minimum required by SBA is 140, but many banks set a higher minimum of 160.

This is significant because a perfect personal consumer credit score generates a FICO SBSS Score of only 140. So without a business credit score, a small business has almost no chance of obtaining an SBA loan.

A minimum personal credit score of 600-650+ is needed to qualify for an SBA loan.

How to Start Generating a Business Credit Score

Filing a DBA or obtaining a business license does not start your business credit file. Forming an LLC or corporation, opening a business bank account in your legal business name or having a listed telephone number in that name will create a business credit file.

Free methods for establishing a business credit file include:

  • Applying for a federal Employer Identification Number (FEIN) from the IRS
  • Obtaining a Dun & Bradstreet DUNs number

It is critical to always use exactly the same form of business name and the same exact address and phone number on everything you do for your business.

Create a place to keep that information and refer to it every time. This is critical for your business score and also for SEO rankings and branding and marketing your business.

Tips for Improving Your Business Credit Score

Now that you know how important your business credit score is to the future of your small business, use these tips to improve it:

  • Correct errors on your credit reports
  • Use auto-payments and reminders to pay your bills on time
  • Open a business credit card
  • Pay off existing debts, but do not close the accounts

Your goal is to use a low percentage of your available credit, ideally only 2-3%.

According to Forbes: “In June 2011, small business financing approval rates at big banks was a paltry 8.9 percent. Today, big banks are granting 25.9 percent of the funding requests they receive, according to the Biz2Credit Small Business Lending Index™ (May 2018 figures). ”

By improving your business credit score, you improve your chances of being among those successful in finding financing to grow.

Photo via Shutterstock

2 Comments ▼

Gail Gardner


Gail Gardner Gail Gardner is the Small Business Marketing Strategist who founded GrowMap.com and co-founded the Blogger Mastermind Skype group. She mentors small businesses and freelancers, especially writers and social media marketing managers.

2 Reactions

  1. Gail Gardner

    I hope people read this post because I was really surprised by the research I did. Who knows that you need to have and use credit, BUT to have a great credit score you should make sure you only have debt of 1-3% of your available credit line?

    Or that if you use more than that monthly, you should make sure your monthly payment occurs BEFORE your credit is reported?

    And who knew that you need to have $10,000+ sitting in your checking account to have the strongest credit score? Most people I know would move that money out of checking into savings or elsewhere.

    I learned a lot from researching for this series on Small Business Loans, so even if you don’t want a loan, I hope small business owners and managers come back to read ALL of the content in that series when it goes live.

  2. How can I get my business credit score??

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