Minimum credit scores for business loans: what you need to know

If you’re a business owner or in the C-suite of an enterprise-level company, chances are that you’ll need a business loan from time to time. Whether you’re waiting on revenue in your accounts receivable department or you just received a purchase order you don’t have the money to fulfill, business loans come in handy.

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In most cases, one of the biggest requirements for getting a business loan is having a reasonable business credit score. Below, you’ll find information on minimum credit scores required for business loans, the role of business and personal credit scores in getting a loan, and improving your scores to qualify for better options.

What is the minimum credit score for business loans?

Generally, there is no minimum credit score needed to qualify for business loans. Some companies don’t even consider your credit score in the underwriting process. These lenders pay more attention to things like your company’s sales and revenue.

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Nonetheless, the vast majority of lenders will use your credit score to determine whether or not you qualify for a loan. If your business credit score isn’t enough, they’ll ask for a personal guarantee. In this case, your personal score will come in handy.

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You’ll find the requirements for different loans below. First, here’s a snapshot of the credit score ranges you’ll need to consider.

• Business credit score range: Your business credit score ranges from 1 to 100. Scores between 80 and 100 are considered great and will qualify your business for most loans. If your business credit score is below 80, you may need to make a personal guarantee for most loans.
• Personal credit score range: Personal credit scores above 700 are considered excellent and will qualify you for just about any loan. However, credit scores below 680 start to limit your options.

Qualifying for loans depending on your credit score

There is no single credit score for a small business loan. Different types of loans will come with different credit score requirements. The loan you qualify for also depends on the type of credit score you’re using. Find more details on credit scores that qualify you for specific types of loans below.

Business credit scores

If you’re using your business credit score, consider the following:

• 80 to 100: If your business’s credit score is between 80 and 100, your business has good credit on its own. Thus, it will likely qualify for any type of loan it needs on its own without a personal guarantee.
• 50 to 79: If your business credit score is between 50 and 79, it’s considered fair. This may be enough for your business to access secured loans like real-estate or equipment loans. However, you’ll likely require a personal guarantee to access unsecured lending products.
• 49 and below: If your business credit score is 49 or lower, there’s a high likelihood that you’ll require a personal guarantee for most loans, although there are some sales-based underwriting options, like Ramp, that you may qualify for.

Personal credit scores

If you’re making a personal guarantee, consider the following:

• 700 and higher: Scores that are 700 or higher will qualify you for just about any business loan you need.
• 680 to 699: Although you may not qualify for all business loans, you’re in good shape for an SBA (U.S. Small Business Administration) loan and most secured business loans.
• 640 to 679: You’ll likely still qualify for secured loans. You may even still qualify for SBA loans, but you’ll need strong business credentials to make the cut. In fact, the minimum credit score for SBA loans is 620. For example, you may need to show that you’ve been in business for several years or that you generate a high level of annual revenue.
• 600 to 639: If your score is under 640, you’ll have a hard time getting most loans. However, if you’ve been in business for a while and generate meaningful revenue, you may still qualify for secured loans like equipment financing or short-term invoice financing options. Moreover, if your score is over 620 and you have strong supporting documents, you may qualify for an SBA loan.
• 550 to 599: If your credit score is below 600, you’ll have a very difficult time finding an affordable lending option. You may qualify for high-cost invoice financing or merchant cash advances.
• 549 and below: If your credit score is below 550, chances are you won’t meet most lenders’ minimum requirements. Pay very close attention to any loan you qualify for, as the interest rate and fees will likely be extremely high.

What factors impact your credit score?

If you’re interested in improving your credit score to qualify for better lending options, you’ll need to know what factors play a role in your score in the first place. These factors are slightly different when you compare business and personal credit scores.

Business credit scores

The factors that impact your business credit score include:

• Payment history
• Outstanding balances
• Credit utilization ratio
• Trade experiences
• Years in business
• Business size

Considering these factors, businesses with the best credit scores are relatively large and have been around for several years. These companies have a history of making payments as per the agreement and quickly paying down outstanding balances.

Personal credit scores

The factors that impact your personal credit score are as follows:

• Payment history
• Credit utilization rate
• Credit age
• Credit mix
• New accounts

Considering these factors, you likely have a great credit score if you make it a point to make your payments on time, use less than 30% of your available credit limit, and have a good mix of accounts that you’ve maintained for several years.

How to improve your credit score

If you have less-than-perfect credit, don’t worry; you’re not alone. Nor are you stuck with a poor credit score forever. Here are a few tips to help improve your credit score.

Business credit scores

Consider these tips to improve your business credit score:

• Take advantage of modern finance technology like Ramp to streamline bill payments and alleviate the risk of late or missed payments.
• Open a secured business credit card and use it properly to build your credit history.
• Be patient, the age of your business plays a role in your credit score.
• Keep your credit utilization to 30% or less.
• Grow your business revenue and profitability, as larger businesses enjoy better credit scores.

Personal credit scores

Here are a few tips to help you improve your personal credit score:

• Make larger than minimum payments.
• Open a secured credit card and use it responsibly.
• Set up automatic bill payments to avoid making late payments.
• Keep your credit utilization rate below 30%.
• Ensure you have a good mix of loan types, including unsecured and secured loans.

Alternative options for those with poor credit scores

If you have a poor credit score but need access to a credit card or other form of financing, you’re not out of luck. Find a few financing options you should consider below.

Secured credit cards

With secured credit cards, you place a security deposit with your lender. That security deposit secures your available credit. From there, you use the card as you would a traditional credit card.

Secured credit cards are designed to help you build your credit to qualify for more advantageous loans in the future.

Equipment financing

Equipment financing is secured by the equipment the loan is being used to finance. As such, these loans are much easier to get than unsecured loans. Consider financing the equipment you need to build your business and its credit score.

Sales-based underwriting

Some companies, like Ramp, pay less attention to your credit score and more attention to your monthly sales. Consider choosing a sales-based underwriting loan to access the funding you need.

Get Ramp to improve your credit and access capital

Ramp isn’t as concerned with your credit score as most traditional lenders. Instead, they use your sales to determine your loan eligibility. That means you can use the platform to improve your credit score while you access the funding you need. The platform also comes with intuitive money management tools designed to help your business grow. Find out if your business qualifies for Ramp today.

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