Any time you apply for a credit card, mortgage, or personal loan, lenders want to know one thing; can you be trusted to pay it back? That’s where your credit score and credit history come in. They give lenders a quick overview of how responsibly you’ve handled debt in the past.
The same idea applies when you’re looking into small business financing. Whether you’re applying for a traditional loan or exploring other funding options, lenders will check your credit score as part of the process. It helps them decide not just whether to approve your loan, but also what kind of terms you’ll qualify for.
One of the most common questions we hear is: What credit score do I actually need to get a business loan? While requirements can vary depending on the creditor and the type of loan, a good rule of thumb is this that you’ll likely need a credit score of 700 to qualify for most standard business loans. Some programs are more flexible, but having a strong score gives you a better shot at approval, and at better terms.
What Is a Credit Score and Why Does It Matter?
A credit score is a way for potential lenders to evaluate your risk as a borrower at the first glance. Simply put, when applying for a business loan, your credit score plays a major role in the decision-making process. Most lenders follow general loan approval criteria, preferring scores above 700 for better interest rates and lower down payments. If you’re wondering “Is 605 a good credit score?”, it’s considered fair, but you may face stricter loan requirements or higher rates.
But that’s not all. Many lenders also review your business credit score, especially if you’ve been operating for a while. Just like your personal score, it’s based on things like debt history, payment habits, and time in business. A strong score here (usually above 700) can boost your chances of securing a loan on better terms and conditions.
Minimum Credit Score Requirements by Loan Type
Credit scores range from poor to excellent, with 670+ considered good and 740+ very good. Most lenders prefer borrowers in this range, but if your score is closer to 500, don’t worry since you might still qualify for the loan. Just expect higher rates, larger down payments, and stricter terms. Here are some of the common business loan programs and their minimum credit score requirements:
SBA Loans
The SBA loan credit score requirement depends on the program. SBA 7(a) loans generally need a score between 680–700, while SBA Express Loans may accept scores as low as 620. A stronger score usually improves your approval chances and terms, especially for SBA 504 loans.
Business Line of Credit
To qualify for a business line of credit, lenders usually expect a score of 680 or higher. Some flexibility exists with online lenders, but banks prefer well-established businesses with strong credit histories. As said, higher scores lead to better interest rates and larger credit limits.
Term Loans
Term loan eligibility is often related to your credit profile. Traditional lenders typically require scores above 700, and anything over 740 may get you the best rates. Lower scores may still qualify with alternative lenders but usually involve stricter terms.
Equipment Loans
Because the purchased equipment serves as collateral, equipment financing tends to have looser credit score requirements. Borrowers with scores in the 500s may qualify. However, stronger credit still improves your odds of securing favorable repayment terms and lower interest.
Commercial Real Estate Loans
Securing a commercial real estate loan usually means meeting a higher credit bar. Most lenders look for a minimum score of 680, though many prefer applicants with 700+ for smoother approval and better terms.
How to Improve Your Credit Score Before Applying for a Business Loan
Keep in mind, credit scores are always changing, and there are steps you can take to boost your score and improve your chances of getting approved for a business loan. But be cautious of any service that promises to “clean up” your credit report and raise your score instantly. There’s no magic fix for credit.
Start with credit repair basics; check and monitor your credit reports for any errors or outdated information. Next, aim to pay off debt, especially high-interest balances, and try to reduce credit utilization to below 30%. Lenders view low usage as a sign of responsible borrowing.
Another simple way to improve your credit rating is by making all payments on time, including utility bills and credit cards. For business owners, keeping vendor accounts in good standing and separating personal and business finances can also help. These small steps add up over time and can raise your score enough to qualify for better financing options when you’re ready to apply.
Secure the Loan You Need with Providence Strategy Group
Ready to take the next step toward securing the funding your business needs? Whether you’re just starting out or planning to grow, understanding your credit and exploring the right business funding options makes all the difference. At Providence Strategy Group, we’re here to help you apply for a business loan, strengthen your credit, and make smart moves in your financial planning journey.
Get in touch with our finance-savvys today!
Frequently Asked Questions – FAQs
- What credit score do you need for a business loan?
The minimum credit score for a business loan typically ranges from 500 to 680, depending on the lender and loan type.
- How does credit score affect a business loan?
When you apply for a business loan, creditors will assess a few key factors to determine if you’re eligible for funding. Your credit score is one of these factors.
- What credit score should I have to start a business?
Scores between 800-850 are considered excellent and signify low-risk borrowers, while scores between 740-799 are very good and scores between 670-739 are good.
- What kind of loan can I get with a 670 credit score?
A 670 credit score is considered to be in the “good” credit range by the two main credit scoring models. You may be able to get approved for a mortgage or auto loan depending on your specific financial situation with a 670 credit score.
- What is the trick to increasing credit score?
- Pay bills on time.
- Pay credit card balances strategically.
- Ask for higher credit limits.
- Become an authorized user.
- Dispute credit report errors.
- Deal with collections accounts.
- Use a secured credit card.
- Get credit for rent and utility payments.