Most lenders will consider your personal and probably business credit score when you apply for a small business loan. As discussed below, your personal score often determines the type of financing you might qualify for, loan amount, and even interest rate.
What Credit Score Do I Need for a Small Business Loan?
A credit score of 670 or higher is usually good credit. The better the score, the lower the interest rate on your loan.
Your Business Loan Options Based on Credit Score
Your credit score determines the commercial financing options available, although minimum requirements vary by lender.
If you have fair credit (580 to 669), your options may include:
- Asset finance (business vehicle, equipment, etc
- Merchant cash advances and invoice factoring (based on future business profits)
- Lines of credit
- Online lenders (term loans)
- Business or personal asset-secured loans
Options for poor credit (300 to 579) include:
- Secured financing (such as business equipment or vehicle
- Invoice factoring
- Merchant cash advance
Will My Business Credit Score Help (Do I Need One?)
You can obtain your business credit score from credit reporting bureaus like Equifax and Experian. The score is linked to you by an Employer Identification Number (EIN), isn’t necessarily a precondition for getting a business loan, and is unlikely to limit your financing options. However, having a good business credit score isn’t bad. Some lenders may consider it alongside your score.
How Credit Bureaus Calculate Your Business Credit Score?
Key elements of your business’ credit history determine your business credit score. They often include:
- Your credit transactions, including inquiries and applications
- Business debt payment history (a history of default and late payments can hurt your score)
- Years in business (companies with little history may appear riskier to lenders)
- Past/current legal problems and financial distress (delinquent taxes, bankruptcy, and court judgments against your business can dent your credit)
Other Small Business Loan Eligibility Factors
Most lenders will consider these other details when assessing your creditworthiness:
- Business revenue (indicates your capability to repay the funds you’re requesting)
- Duration in business (at least a year or three in operation may be required)
- Net operating income (the cash available after covering your operating expenses may come into play)
- Existing debt (if your outstanding debts exceed or equal your net operating income, it can hurt your business loan eligibility)
- Collateral (any personal or business assets that the lender can hold on to as you repay your loan can boost your qualification or even compensate for a low credit score)
- Industry risk (some types of business loans may be harder to get if you operate in a traditionally high-risk sector, such as financial or cannabis)
Contact Fidelity Mortgage Lenders, Inc. for Help!
Do you need help to get a commercial real estate loan due to less than perfect credit? If yes, consider applying for alternative financing with us at Fidelity Mortgage Lenders, Inc. We qualify you based on the property you’re buying instead of your credit score. Contact us today for flexible commercial property loan options!
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