How Your Credit Score Impacts Business Loan Approval and Interest Rates
Discover how credit scores affect business loan approvals and interest rates. Learn proven strategies to improve your credit and qualify for better financing terms.
Your credit score is one of the most powerful factors determining whether you get approved for a business loan and what interest rate you will pay. Understanding this relationship can save you thousands of dollars and open doors to better financing opportunities.
Personal vs Business Credit Scores
For new businesses and small enterprises, lenders heavily weigh your personal credit score (FICO). Established businesses also build business credit scores through Dun & Bradstreet, Experian Business, and Equifax Business. Both scores matter, but personal credit typically carries more weight for small business loans.
Credit Score Tiers and Their Impact
Excellent credit (750+) qualifies you for the best rates and terms with minimal documentation. Good credit (700-749) still offers competitive rates but may require more collateral. Fair credit (650-699) limits your options and increases costs significantly. Below 650, traditional lending becomes difficult, pushing you toward alternative lenders with higher rates.
Improving Your Credit Before Applying
Start by checking your credit reports for errors and disputing any inaccuracies. Pay down high credit card balances to improve your utilization ratio—ideally below 30% of available credit. Make all payments on time for at least six months before applying. Avoid opening new credit accounts or making major purchases that could trigger hard inquiries.
Building business credit takes time. Open vendor accounts with suppliers who report to business credit bureaus, establish a business credit card, and maintain separate business and personal finances.
