Business loan requirements among lenders mostly differ. One common requirement among lenders is a good credit score. Your personal and business credit score can break or make your chances at qualifying for a business loan. Most lenders expects entrepreneurs to have a minimum credit score before their business loan request can be approved.
Although, there are some lenders that do not restrict their lending options, one must still always aim at having a good credit score. So, how can you know if you have the required credit score?
You know this first by self financial evaluation, by looking inward and asking, is my business financially healthy? The answer to that question might be what you need. In this article, we will aim at exploring the issues concerning credit score eligibility for business loan.
Is there a minimum credit score for business loan eligibility?
There is no collective minimum credit score among lenders. Every lender with their own requirements. But most lenders will consider businesses with a credit score of 50 at a bare minimum and a stellar credit score of 80 and above as most ideal. Get more about small business loans on www.mainstreetlvnm.org/what-is-needed-for-a-small-business-loan/
These scores varies among lenders as I’ve said before. With a potential collateral in place, a credit score below the lender’s minimum score might also be considered.
What’s a good credit score for a business loan?
Usually, the credit score required for a business depends solely on the lender and the type of loan you want to apply for. Although, minimum credit score can vary depending on purpose, financials and a myriad of other reasons, this is what you can expect when looking to apply for business loans;
- For banks: On average, a minimum of 680 is required but 700 is the most ideal.
- Small Business Administration (SBA): It varies by loan program but a minimum of 620-680 is required.
- Regular lenders: they require a lesser credit score or no credit score depending on the lender.
Which is more important, business or personal score?
Firstly, you should have it in mind that personal and business credit scores are two different things. They use different scoring system. While personal credit score evaluates your credit worthiness and willingness to pay back a debt, your business credit score evaluates your business’s ability to meet its own financial obligation.Click here to know how your credit rating can help you negotiate deals.
Depending on the type of loan you are applying for, most lenders would want to evaluate both. Having a high score in both increases your chances of getting your loan application approved. They are both important, but most lenders tend to put personal credit score above business credit score.
The importance of a good credit score in the acquisition of a business loan cannot be overemphasized. It is with your credit score that these lenders are able to entrust their money in your money. Business finance always requires a loan assistance especially at the beginning of the business venture. So, having a credit score that establishes trust between you and the lender is imminent.