2025 Credit scores for business funding

February 3, 2025

Understanding Business Loan Credit Score Requirements

When applying for a business loan, your credit score is one of the most critical factors lenders consider. However, credit score requirements can vary significantly depending on the type of loan, the lender, and other financial metrics. To improve your chances of approval, it’s essential to understand where you stand in four key areas: 


1. Credit Score: Both your personal and business credit scores matter. 

2. Years in Business: Most lenders prefer businesses with at least two years of operation. 

3. Annual Revenue: Higher revenue improves your chances of approval. 

4. Collateral: The type of collateral required depends on the loan you’re seeking. 


Among these, credit score is the most important metric and is often the primary reason for loan rejections. While there are options for business owners with lower credit scores, they often come with higher costs. Generally, a **minimum credit score of 650** opens up the most financing options. 


Why Does Credit Score Matter?

Your credit score is a three-digit number that reflects your financial responsibility and reliability. It provides lenders with a quick, objective assessment of your credit risk. 


- High Credit Score: Signals to lenders that you’re likely to repay loans on time, often resulting in better terms like lower interest rates and longer repayment periods. 

- Low Credit Score: May lead to higher interest rates, stricter loan conditions, or outright rejection. 



Understanding Personal Credit Scores

The most commonly used personal credit score is the FICO Score, which ranges from 300 to 850. It’s calculated based on five factors: 


1. Payment History (35%): Whether you’ve paid past credit accounts on time. 

2. Amounts Owed (30%): Your credit utilization ratio (how much credit you’re using compared to your limit). 

3. Length of Credit History (15%): The age of your oldest and newest credit accounts. 

4. New Credit (10%): Recent credit inquiries and newly opened accounts. 

5. Credit Mix (10%): The diversity of your credit portfolio (e.g., credit cards, mortgages, loans). 


FICO Score Ranges

- 300-579 (Bad Credit): Limited financing options; may qualify for cash advances or invoice factoring. 

- 580-669 (Fair Credit): Eligible for equipment financing, lines of credit, or term loans. 

- 670-739 (Good Credit): Qualify for most loan types, including SBA and commercial real estate loans. 

- 740-799 (Very Good Credit): Access to the best loan terms and rates. 

- 800-850 (Exceptional Credit): Top-tier financing options with the most favorable terms. 


Understanding Business Credit Scores 

Business credit scores, typically ranging from 0 to 100,, reflect your company’s creditworthiness. Key factors include: 


- Payment History: Timely repayment of debts. 

- Credit Utilization Ratio: How much of your available credit you’re using. 

- Length of Credit History: Older accounts can boost your score. 

- Public Records: Bankruptcies, liens, or judgments can hurt your score. 

- Company Size and Industry Risk: Larger companies or less risky industries may have higher scores. 


Lenders often review both your personal and business credit scores when evaluating your loan application. 


How to Improve Your Credit Score 

If your credit score isn’t where you’d like it to be, take these steps to boost it: 


1. Monitor Your Credit Reports: Check for inaccuracies and ensure outdated negative information (e.g., bankruptcies over 10 years old) is removed. 

2. Get a Major Credit Card: Use it responsibly and make timely payments. 

3. Set Up Automatic Payments: Avoid missed payments, which can significantly impact your score. 

4. Resolve Disputes Early: Don’t let vendor disputes escalate to collections. 

5. Consolidate Debt: Pay off high-interest credit card balances or convert them into installment loans. 

6. Avoid Closing Accounts: Keep old accounts active to maintain a longer credit history. 

7. Limit Credit Applications: Each application can lower your score by about five points. 


Ready to Compare Business Loan Options? 


Your credit score is the first thing lenders evaluate, so it’s crucial to understand where you stand and take steps to improve it if necessary. Whether you’re exploring SBA loans, equipment financing, or lines of credit, Lendio can help you compare offers from multiple lenders. 


Apply for a small business loan today and find the financing solution that fits your needs!

Loan Type Minimum Credit Score
SBA Loan 615+
Term Loan 600+
Line of Credit 600+
Invoice Factoring No minimum requirement
Equipment Financing 520+
Business Cash Advance (MCA) 500+
Commercial Real Estate Loan 650+
Lender Type Minimum Credit Score
Banks/Credit Unions 700+
SBA Lenders 650+
Founder Funding 550-650
CDFIs/Nonprofits Varies (some have no minimum)
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How to Get a Business Loan: A Founder’s Guide to Funding Securing funding is a critical step for many entrepreneurs looking to start or grow their businesses. Whether you’re launching a new venture or expanding an existing one, understanding how to get a business loan can make all the difference. In this guide, we’ll walk you through the steps to secure the funding you need to achieve your business goals—and why applying with Founder Funding can be a smart choice for your business funding and capital needs. 1. Determine Your Funding Needs Before applying for a business loan, it’s essential to know exactly how much funding you require and what you’ll use it for. Common reasons for seeking a business loan include: Starting a new business Purchasing inventory or equipment Expanding operations Hiring additional staff Covering cash flow gaps Having a clear purpose for the loan will not only help you determine the amount you need but also demonstrate to lenders that you have a solid plan in place. 2. Understand Your Loan Options There are several types of business loans available, each designed to meet different needs. Some of the most common options include: Term Loans: A lump sum of money repaid over a set period with interest. Ideal for large, one-time expenses. SBA Loans: Government-backed loans with favorable terms, often used for startups or small businesses. Business Lines of Credit: Flexible funding that allows you to draw funds as needed, perfect for managing cash flow. Equipment Financing: Loans specifically for purchasing business equipment, with the equipment itself serving as collateral. Invoice Financing: Advances on outstanding invoices to improve cash flow. Research each option to determine which one aligns best with your business needs. If you’re unsure where to start, Founder Funding can help you explore the best financing solutions tailored to your business. 3. Check Your Credit Score Your personal and business credit scores play a significant role in the loan approval process. Lenders use these scores to assess your creditworthiness and determine the terms of your loan. Before applying, review your credit reports and address any errors or issues that could negatively impact your score. If your credit score is lower than desired, consider taking steps to improve it before applying for a loan. 4. Prepare Your Documentation Lenders will require specific documents to evaluate your loan application. Common requirements include: Business plan Financial statements (profit and loss, balance sheet, cash flow) Tax returns (personal and business) Bank statements Legal documents (business licenses, articles of incorporation) Having these documents ready in advance can streamline the application process and improve your chances of approval. Founder Funding can guide you through the documentation process to ensure your application is complete and compelling. 5. Compare Lenders Not all lenders are created equal. Take the time to compare offers from banks, credit unions, and online lenders. Consider factors such as interest rates, repayment terms, fees, and customer reviews. By shopping around, you can find a lender that offers the best terms for your business. Alternatively, you can simplify the process by applying with Founder Funding, which connects you with a network of trusted lenders tailored to your business needs. 6. Submit Your Application Once you’ve chosen a lender, it’s time to submit your application. Be thorough and accurate when filling out the forms, and double-check that you’ve included all required documentation. After submitting your application, be prepared to answer any follow-up questions from the lender. If you apply through Founder Funding, their team can assist you every step of the way, ensuring a smooth and efficient process. 7. Review and Accept the Offer If your application is approved, carefully review the loan offer before accepting it. Pay close attention to the interest rate, repayment schedule, and any additional fees. Make sure the terms align with your business’s financial capabilities and goals. Founder Funding can help you evaluate offers to ensure you’re making the best decision for your business. 8. Use the Funds Wisely Once you’ve secured the loan, use the funds as outlined in your business plan. Properly managing the loan can help you achieve your objectives and build a positive relationship with your lender, which may be beneficial for future financing needs. Final Thoughts Securing a business loan doesn’t have to be overwhelming. By understanding your funding needs, exploring your options, and preparing a strong application, you can increase your chances of success. Remember, the right funding can provide the resources you need to take your business to the next level. If you’re ready to take the next step, consider applying with Founder Funding for your business funding and capital needs. Their expertise and network of lenders can help you find the perfect financing solution to fuel your business growth. Good luck!
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