How to Qualify for a Small Business Loan: Credit Requirements

Small businesses often struggle to get a small business loan because of the credit requirements for obtaining such a loan. Lenders generally see small businesses as a high credit risk, and small business loan applicants find that they are turned down more often than not.

The criteria for a business loan are stricter than for personal loans. Many small businesses must start out using the business owner's personal credit to obtain necessary funds from lenders - if the owner's personal credit is strong enough.  

However, using your personal credit to borrow the necessary funds for your business puts your personal credit at risk if your business goes under. It's best to establish good business credit and use that to apply for your small business loans.

How to Qualify for a Small Business Loan: Credit Requirements

Satisfactory business credit is the essential first qualifying criteria for getting a small business loan in the amount you need on terms you can afford.

Proper preparation is essential to making your small business loan credit strong enough to meet the requirements for a small business loan. Start by building your business credit and improving your "credit worthiness" in advance.

To begin building your business credit, start by doing a credit assessment to see if you meet small business loan credit requirements and the criteria of the credit bureau.

When that is done, it's time to establish a business credit history. Most small businesses buy services, equipment and other necessities from vendors. Look for vendors who will grant you credit for these purchases. Timely repayments will help build your business credit history and also help you be perceived as an attractive loan candidate to business loan providers.  You can further improve your credit by working with businesses that directly report your credit history to the credit report agencies.

By following these steps, you may not achieve the highest business credit score, but you can do well enough to be considered a low-risk loan applicant with satisfactory small business loan credit.

Find out if your state has government programs, organizations or non-profits that focus on helping the small business. These organizations can help you find loans geared towards helping a small business establish satisfactory business credit.  State government web sites are good places to research these organizations.