How Do Credit Scores Affect Business Loan Approval?

How Do Credit Scores Affect Getting Business Loans?

Business credit scores impact the ability of a business to secure loans in the same way personal credit can affect an individual’s ability to get a mortgage or buy a car. For a business looking to obtain a loan, negative information or a poor credit score can make it difficult to get business loan approval. Even if you are successful in obtaining business loan approval, the lender may view poor business credit scores as a risk factor, causing the loan interest rates/cost to be higher on the approved loan. Having a good business credit score, on the other hand, can lead to long-term savings by securing more favorable (lower) interest rates from the lender.

Does My Business Have Credit Scores?

Yes, your business has credit scores, just like you personally have credit scores. It works the same way – your business credit score is an indicator used by banks and other lenders to determine how likely or able you are to pay them back in full and on time.

Why Do Business Credit Scores Matter?

Business credit scores are vitally important because they may determine if a business owner is able to secure business financing in the form of business loans or SBA loans. Securing funding is one of the biggest challenges faced by business owners. Not only can loans be determined by scores but vendors and partners also review your business credit scores before diving in to extend credit or work with you. As a business owner, you need to fund business operations, which is especially challenging early on when a business is young and cash flow is limited. When a business owner applies for a business loan, banks and other lenders often look first at the business credit score as a guide to the company’s financial health.

What Affects Business Credit Scores?

Just like personal credit, your business credit score can be affected by things like debt, missing or late payments, collections, liens & judgments, charge offs, and the establishing of accounts in the name of the business that are in good standing. Obviously, securing a business loan can impact a business and its credit score in a positive way.

How Do I Improve My Business Credit Score?

If you have been denied a loan because of a poor business credit score, the first step to improving your score is to identify what negatively impacted it. You can repair your business credit score by paying off debt, opening business-related accounts or, in some cases, simply keeping current accounts open and active. If you do have negative info on your credit working with a business credit expert who can repair these issues is a great plus. Closing business accounts is not something that fills lenders with confidence, so keep them open if possible. Obviously, securing a loan goes a long way to improving your business’s credit. You can improve your business credit score by making your payments on time, or even early if your cash flow allows it. Keep your debt low and manage any new debt you take on.

We recommend against calling credit bureaus yourself, as you may say something on record that can make repairing your business credit even more difficult. At North Shore Advisory, we have 30 years of experience working with the bureaus and fixing business credit. Business credit repair is a tedious process, but we have the resources in place to help you.

Can I Get a Business Loan with Bad Credit?

Anyone can get a business loan if they are willing to accept the terms. The key is, what will the price of that loan be? If a loan is costing 150% of the money borrowed, is there a point to it? It is very important to understand the cost of the loan and how that cost will impact the goals of the company.

The higher the price, the less profit a business may walk away with – what is the point of having a business if your lender is the only one profiting?

North Shore Advisory offers a Business Credit Repair program for companies with established profiles who need damaging information removed. We will customize our services to fit the needs of your unique business. Reach out to us today for a free consultation.


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