TL;DR: There’s no hard and fast rule, and your credit score is usually just one of many factors taken into consideration.
Your credit score is used by lenders to assess your reliability when it comes to paying back what you owe. But just how important is it when it comes to the final decision?
Will a low credit score rule you out of getting a loan for your business entirely? And if so, what’s the minimum score you need?
Only a small part of the decision
The answers to these questions actually varies depending on what lender you’re talking about. This is because different lenders have different rules and criteria.
In most cases, however, your credit score – your personal score as well as your business’s score – will only play a small part in the decision.
Credit scores give a good overall impression of your creditworthiness – how likely it is that you’ll be able to pay back the money you borrow. But they don’t tell the whole story, and the underlying report gives a far more complete picture.
When assessing whether or not you’re eligible for a business loan, lenders will use a combination of different criteria. The credit score together with the detail of your report will be just one of those.
Your business’s performance matters
In this case, the viability of your business is critical. There wouldn’t be any point in giving cash to a business that’s losing money, as the chances are, the lender will never see that cash again!
So pretty much every lender you come across will ask to see information about your business’s performance over the last few months. From this, they’ll be able to build a pretty solid idea of how likely it is you’ll be able to pay them back.
The extent of the information they ask for will vary from lender to lender. Some will ask for year-end accounts, along with sales forecasts.
Whereas some (like us) will only need your business bank statements from the last few months.
Don’t ignore your credit score
In the background, a lot of lenders will have an idea of an “ideal” credit score range. So not a minimum credit score per se, and it probably won’t be a deal breaker if you’re not inside that range.
But despite this, it’s a good idea to keep on top of both your personal and your business credit scores. Not only does it make getting finance a lot easier if you have a strong score, it’s also just makes good business sense.
A higher credit score generally means you’re keeping your finances in order and that you’re running your business in a sustainable way.
Things which can drag your credit score down include:
- Paying bills late
- Using too much credit
- Applying for too much credit at once (hard searches)
Even if you don’t care about your credit score, these are generally things you don’t want to be doing. They all come with risks and are likely to have an effect on the longevity of your business.
What to do next
If you want to read more about how credit scores work – how they’re calculated and what can bring them down – read our knowledge guide.
We’ve also written an article on how you can improve your business’s credit score.