What credit score is needed to qualify for a business loan?

As an entrepreneur planning to expand my small manufacturing business, I’m researching financing options and keep encountering conflicting information about credit score requirements. I’m specifically wondering: What is the minimum personal and/or business credit score needed to qualify for a business loan? I’m focused on traditional bank loans and SBA-backed financing since they offer favorable terms, but I also need clarity on how credit score thresholds differ between lenders. Since I have a 650 FICO score and my business has been operating for 3 years, I’m particularly interested in whether borderline scores might still work if offset by strong cash flow or collateral. Could you explain the typical score ranges for different loan types (e.g., term loans, lines of credit, SBA 7(a)) and whether lenders prioritize personal or business credit more heavily?

Credit Score Requirements for Business Loans

The credit score needed to qualify for a business loan varies significantly based on lender type, loan program, and business factors. Below is a detailed breakdown:

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1. Traditional Bank Loans

• Minimum Credit Score:
  • 680–700+ for conventional business loans.
  • SBA Loans (Small Business Administration):
  • Typically require 680–720+ from business owners.
  • SBA 7(a) loans prioritize scores ≥680, while SBA 504 loans may accept 640+ if other factors (e.g., business history, collateral) are strong.
• Key Influencing Factors:
  • Personal credit score of all owners (≥20% ownership).
  • Business credit history (e.g., Dun & Bradstreet PAYDEX score ≥75).
  • Time in business (≥2 years).
  • Annual revenue ($100k+).

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2. Online Lenders

• Minimum Credit Score:
  • 600–650 for short-term loans, lines of credit, or merchant cash advances.
  • Some lenders accept scores as low as 500–550, but with higher interest rates (15–30%+ APR).
• Trade-Offs:
  • Fast funding (24–72 hours) but stricter revenue requirements ($10k–$50k/month).
  • No collateral needed, but personal guarantees almost always required.

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3. Alternative Financing

• Merchant Cash Advances (MCAs):
  • No fixed credit minimum; focus on 6+ months of processing history ($10k/month).
  • Credit scores <500 may qualify if revenue is robust.
• Invoice Factoring:
  • Relies on client creditworthiness (not borrower’s score).
  • Minimum 500+ if credit checks are involved.

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4. Startup Loans

• Minimum Credit Score:
  • 700+ for traditional startup loans (rare without proven revenue).
  • Microloans (e.g., SBA MicroLoan): 620+ with a strong business plan.
• Requirements:
  • No revenue history needed, but detailed financial projections and personal credit scores are critical.
  • Many lenders require personal guarantees and collateral.

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5. Key Considerations Beyond Credit Scores

• Business Health:
  • Debt-service coverage ratio (DSCR >1.2).
  • Positive cash flow for ≥6 months.
• Collateral: Real estate, equipment, or inventory can offset lower scores.
• Relationship with Lender: Existing business banking may improve approval odds.
• Credit Bureaus:
  • Personal scores: FICO (300–850) or VantageScore (300–850).
  • Business scores: Dun & Bradstreet (PAYDEX), Experian Intelliscore (1–100).

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6. Strategies to Improve Approval Odds

• Boost Personal Credit: Pay down debt, resolve collections, and limit new credit inquiries.
• Strengthen Business Metrics: Increase revenue, build business credit (e.g., prompt vendor payments).
• Explore Guarantors: Add a co-borrower with higher credit.
• Consider Specialized Loans: SBA programs, Community Advantage Loans (for underserved areas), or non-profit lenders.

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Summary of Typical Ranges

Lender Type	Min. Credit Score	Additional Requirements
Traditional Banks	680–720+	Strong business history, collateral.
SBA Lenders	640–680+	2+ years in operation, $100k+ revenue.
Online Lenders	600–650	$10k+/month revenue; personal guarantee.
Merchant Cash Advances	500–550 (or none)	$10k+/month processing history.
Startup Loans	700+	Detailed business plan, collateral.

Final Note: While scores above 700 open access to the best rates and terms, scores as low as 500 can qualify for non-traditional loans with higher costs. Always pre-qualify with multiple lenders to match your credit profile.