You’ve probably heard of your FICO personal credit score, but did you know there is a business FICO score geared towards small businesses? The FICO® SBSS℠ is not widely spoken about, but it can make or break your chances of qualifying for a small business loan. This very specific small business credit score is used to determine the creditworthiness of each business or business owner who applies for business financing. Read our answers to frequently asked questions about how crucial the FICO business credit score is for small business loan applications.

What is the FICO SBSS business credit score?

The FICO Small Business Scoring Service (SBSS) provides a numerical business credit score to indicate the risk associated with providing term loans or lines of credit up to $1 million dollars. The FICO SBSS is customizable and can generate a score quickly. As a result, over 7,500 business lenders, including the U.S. Small Business Administration (SBA), are using it as a tool to pre-screen and approve business loans.

What is the FICO SBSS score range?

The FICO SBSS score ranges from 0 – 300 based on the small business’s likelihood of making payments on time. The higher the score, the lower the risk for lenders.

How does the SBSS work?

The FICO SBSS score pulls from the principal(s) FICO personal credit score, information compiled by business credit bureaus, and other commercial data, including the age of the business, payment history, number of employees, assets and revenue, and so on. The SBSS can also be customized according to the needs of the lender.

How can the FICO SBSS be customized?

Lenders are able to customize the score generator to fit their preferences. For example, if the lender prefers a certain business credit bureau, they can customize the generator to prioritize information from that bureau. If the data is revealed to be too limited, the generator will automatically pull from the next two business credit bureaus consecutively.

The lender can also have the business credit score generator place a greater emphasis on the business owner’s personal credit profile instead of other credit factors. That is, they can opt for the personal credit profile to be considered as the highest determining factor when generating a score.

What is the minimum credit score for SBA loan or other loan consideration?

When determining what business credit score is needed for a small business loan, we should consider both personal and business credit history. While some small business lenders still only require personal credit scores, the FICO SBSS business credit score is becoming increasingly commonplace. Most notably, SBA loans are only available to businesses with SBSS scores of at least 155. Most other lenders who use the score require a minimum threshold of 160 – 180. If a firm has any derogatory information or has minimal business credit, the principal(s) only chance of gaining a minimum FICO SBSS threshold would be to have exceptional personal credit.

Is the SBSS credit score important for franchisee candidates?

According to the Finance Index represented by bQual, the majority of franchise brand owners such as Checkers, Jamba Juice, Lenny’s Sub Shop, etc. reveal an average FICO® score of 748.15, an average FICO® SBSS℠ Credit Score of 191.38 with average liquid assets of $158,760. This would be the ideal candidate to thrive as a franchisee making them a more attractive candidate to a lender and a franchisor.

What is the consequence of having a poor SBSS credit score?

The impact of a poor to average FICO® SBSS℠ Credit Score can cost a business pricing on financing or a rejection on loan approval. Without this much needed financing, a business could fail or be forced to stay stagnant. Plain and simple: most lenders are using the FICO® SBSS℠ Credit Score to quickly determine if providing a loan to a business is worthwhile.

If the FICO SBSS credit score is so important, why doesn’t anyone talk about it?

Lenders are not required to disclose that they use the FICO® SBSS℠ Credit Score generator and very few business owners have even heard of the FICO® SBSS℠ Credit Score. Until now, there have been nearly no resources available to explain how the credit score impacts a business’s ability to qualify for funding and as a result, business owners are left helpless and in the dark.

The truth is, the market is changing; new technology and a fast-paced work world have contributed to a more competitive market. Maintaining an up-to-date and reputable business credit profile is crucial for a business to maintain itself; a derogatory mark, an average personal credit score or a limited business credit profile are all contributing factors that can result in a lender’s decision to deny funding.

How can my small business improve its FICO SBSS credit score?

The first priority is to understand how business credit and scores work. Paying on time is definitely a must, and paying bills early can actually help improve a business score/index. Updating multiple vendors and creditors on a business credit report can show that a firm is a better risk depending on credit history, the amount of debt, and whether the creditor reports to the business credit bureaus. A profile with poor payment histories, collection accounts or judgments may make the process more complicated and it can get very confusing. Most firms hire business credit professionals to provide business credit repair/education and the necessary support to help them reach their credit goals.

As a business owner, it is important to review your Dun & Bradstreet PAYDEX scores, Experian Intelliscore, and Equifax business credit scores along with your personal FICO ® Credit Score initially to make sure the information being reported is correct. If any of your business credit scores and indexes are below excellent, you may need to build more credit or improve your existing business credit. Like personal credit, business credit is a great asset that should be monitored consistently.