What Credit Score to Lenders Look for a Business Loan?
When applying for a business loan, you might be wondering what credit score lenders use. Most lenders don’t blindly offer money to businesses. They want to know that businesses can pay them back, so lenders evaluate their credit score during the application process. Businesses with a high credit score are more likely to get approved than those with a low credit score. By understanding what credit score lenders you use, you’ll have an easier time securing a business loan. What is the prime rate in canada.
Business Credit Score
Most banks will look at one or more business credit scores when applying for a business loan. Not to be confused with a personal credit score, a business credit score is a financial metric of your business’s creditworthiness. It ranges from zero to 100, with 100 representing the best possible creditworthiness.
Your use of personal credit cards, as well as personal loans and other credit-related financial products, won’t affect your business credit scores. Business credit scores are only influenced by credit-related financial products acquired under your business’s name.
Business credit scores are available from the following credit bureaus:
- Dun & Bradstreet
Personal Credit Score
Even if you’re applying for a loan to exclusively cover business-related expenses, the lender may look at your personal credit score. Specifically, the lender will look at your FICO credit score. FICO credit scores can range from 300 to 850. Generally speaking, any FICO score over 670 is considered good.
Even if you have a good business credit score, you may have a poor personal credit score. Because lenders often look at both types of credit scores, a low or otherwise poor personal credit may prevent you from getting approved for a business loan.
FICO credit scores are available from the following credit bureaus:
Private Lenders and Credit Scores: What You Should Know
It’s important to note that private lenders pay less attention to credit scores than traditional banks. Some private lenders, in fact, ignore credit scores when determining loan eligibility. Instead, they look at other aspects of your business, such as its revenue and its use of collateral.
If you have low credit scores, you should consider a loan from a private lender. Private lenders will often approve your application for a loan as long as you have collateral with which to secure it. Banks, on the other hand, almost always require good credit scores especially if you want a favorable interest rate.