Many new business owners require start up loans to get their businesses moving. When it comes time to qualify for a start up business loan, your credit score is one of the top factors that lenders consider. So what role does your credit score play in getting a start up business loan as a business owner?
Defining Good Credit
A good personal score to get a start up business loan is 720 and above. A good business credit score is 80 or above.
Keep in mind, the various business credit bureaus may have different scoring systems. Every lender chooses its own standards. So there may be variations in scoring levels. However, the 2020 Small Business Credit Survey (p. 12) by the U.S. Federal Reserve Banks lays out the general rule for the small business lending industry:
Low credit risk: 80–100 business credit score or 720+ personal credit score.
Medium credit risk: 50–79 business credit score or a 620–719 personal credit score.
High credit risk: 1–49 business credit score or less than 620 personal credit score.
The bottom line is that borrowers who are low credit risks get the most choices of loan products and the best terms and borrowers who are high risk have few choices and will pay the most.
Can Business Owners Get Start Up Loans with a 600 Credit Score?
But what if a business owner has a credit score that is less than 720? What if it is 600 or lower? Well, getting a start up business loan with a credit score below 700 is difficult.
So what can be done? If getting a start up business loan isn’t time sensitive, then business owners can improve their credit score enough to get out of the high risk category. That’s the best long-term option.
Which Credit Score Matters More? Business or Personal?
To get a loan for a business, most lenders will look at both your personal and business credit scores. But a good personal credit score is key.
Remember, a personal credit score and a business credit score are completely different things. They use different scoring systems. Even the credit bureaus are different. Some like Experian report both types of scores. Dun & Bradstreet is strictly business credit reports. A FICO score is a personal score.
Depending on the type of funding you apply for, most lenders will want to check both scores upon your loan application.
Bottom line: most business lenders will want to look at both your personal credit report and business credit report. But personal credit scores remain key.
What Happens if My Credit Score is Low?
If your credit score is low, your small business loan application could be denied altogether. But loan denial is just one of the adverse consequences — there are others. Bad credit scores can result in smaller loan amounts, higher interest rates and fees, and shorter repayment terms.
What Can You Do?
At Unsecured Finances, our specialty is working with business owners to help them get the best funding options available to them. This includes being honest with you about your options in regards to your credit score and pointing you in the right direction for ways to improve how your business presents itself to lenders.
Give us a call to speak with our seasoned professionals and get on track for business funding.
Thinking of Starting a New Business?
Now is the time! With our society ready to get back in action (safely), new business concepts are quickly emerging with creative flows for serving the public without the high risk of spreading the virus. Put your innovative business concepts into play, and connect with us to get the funding you need to start your newest venture!
Financial restraints have been a complaint for many of the dreamers, limiting themselves to their immediate funds. There is an alternative. If you have the dreams and decent credit, Small Business Loans and No Doc Loans are available to you. Our goal is to provide you with the knowledge you need and the resources available to make your dream a reality. Give us a call – we have the education and the perspective to help you obtain the loans you need for your small business. Visit our website or give us a call to find out what financial backing is available to make your business soar!
Unsecured Finances has over 10 years in the consulting business! We specialized in educating and assisting clients on acquiring Unsecured Business Loans and Start-Up Business Specialty Loans including; Unsecured No Documentation (No-Doc Stated Income) Loans, Unsecured Business Loans, and Unsecured Start-Up Business Loans and Lines of Credit from $10,000 to $500,000 without Assets.
Apply on our website to find out if you qualify, or call today for a free consultation: 1-888-294-2584