SBA Loan Credit Score Requirements: Minimum Required Score By Loan Type
Small businesses looking to take advantage of the Small Business Administration’s (SBA) loan programs’ excellent rates and terms face what is often a complex and confusing application process. Merchants may also be confused about the different types of SBA programs available and the minimum credit score calculations required to qualify.
Overall, the SBA is fairly conservative where lending standards are concerned, although somewhat less so than a typical bank. Below, we’ll go over the minimum FICO score SBA loan requirements for each type of SBA loan and what you can do if you don’t think you’ll qualify.
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SBA Credit Score Requirements By Loan Type
Here’s a breakdown of the minimum credit rating you’ll usually need to have to qualify for various SBA loans:
|Minimum Credit Score
|SBA 7(a) Loans
|SBA CDC/504 Loans
|SBA Disaster Loans (EIDL & Physical Injury Loans)
|SBA Export Loans
SBA 7(a) Loans
The SBA’s flagship loan, the SBA 7(a), is one of the most versatile loans in the financial industry. Businesses can use this loan for everything from buying vacant land, to equipment, to operating costs. Just about the only thing that you can’t use it for is paying off inadequately secured creditors and a handful of prohibited industries.
You can get up to $5 million with a 7(a) loan, with a maximum term of 10 years for most expenses (25 years for real estate). The SBA 7(a) credit score requirements are 640 or higher.
SBA CDC/504 Loans
The SBA 504 loan is the SBA 7(a)’s commercial relative. While there’s a fair bit of overlap between the loans with regard to what they can be used for, the 504 was originally intended for buying commercial real estate and financing big-ticket equipment. As such, the term lengths trend a bit longer: 20 to 25 years.
In contrast with 7(a) loans, the 504 loan is a bit less flexible, has lower fees, and fixed interest rates. It also doesn’t require any outside liens. As such, the credit score requirement is higher at 680.
SBA Microloans are smaller-dollar (less than $50K) loans offered to businesses at low-interest rates. Whereas SBA 7(a) and 504 loans are typically made through a bank, SBA Microloans are made through a nonprofit or community-based organization.
As for SBA Microloan credit score requirements, it’s possible to be approved with a credit score as low as 575 if you’re otherwise a strong applicant. Most borrowers, though, will want to have a credit score of at least 640.
SBA Disaster Loans (EIDL & Physical Injury Loans)
SBA Disaster Loans are a different game entirely. Whereas applicants for the previous types of loans are heavily vetted during the application process, the goal of disaster loans is to get the money disbursed quickly to distressed areas. Because of this, SBA Disaster Loan credit score requirements typically don’t come into play for determining eligibility.
That said, the SBA does enforce any other criteria and qualifications for specific EIDLs, so make sure you’re compliant.
The SBA CAPLine credit score requirements fall between the 7(a) and 504 loans at 660.
SBA Export Loans
We often don’t think of small businesses when we’re talking about exports, but many small businesses do, in fact, sell internationally. The SBA’s Export Loan programs are designed to help those businesses reach their foreign markets.
The three programs — International Trade Loan, Export Express, and Export Working Capital Program — are pretty different from one another, but they all require a minimum credit score of 660 to qualify.
Why Your Credit Score Is Important To The SBA
The SBA, for the most part, does not originate loans. Instead, the SBA guarantees a percentage of each loan offered through its approved lenders. This means that if you default on your loan, the SBA will be responsible for paying the lender whatever portion of the loan it’s guaranteed. As the SBA is taking on this responsibility, your fitness as a borrower becomes very important. For better or worse, credit scores are a shorthand for determining how likely it is that you’ll pay back your debt.
Likewise, the SBA’s partnered lenders, which also tend to be traditional lending institutions such as banks, also want to minimize their risk. That said, SBA loans tend to be a bit more forgiving than similar products from the same lender. So while you’re credit score still matters, it may not need to be as high a priority as it would be if the SBA weren’t involved at all.
Other SBA Loan Requirements
Your credit score is just one aspect of your borrower profile. Even if you have an amazing credit score, the SBA still wants to see that you have the business acumen to keep your company afloat for an extended amount of time. They also want to see that your revenue can support your business as well as service your debt.
What’s the mean in practice?
The SBA may have minimum monthly or annual revenue requirements and could also require that you’ve been in business for a few years. The exact requirements vary between programs, so go take a look at our SBA Loan Requirements: What You Need To Know About Qualifying For SBA Loans feature.
What To Do If You Don’t Meet SBA Credit Score Requirements
If you don’t meet the SBA loan credit score minimum for the SBA loan you’re hoping to get, you may have a rocky road ahead of you. That said, there are things you can do and possibilities you can exhaust before giving up.
If all of your other borrower requirements look good, and you haven’t had any recent bankruptcies, there’s a chance your credit score will be overlooked so long as it’s not too low. The SBA Microloan program, in particular, is a bit more flexible. It’s not unheard of for borrowers with credit in the high 500s to qualify for an SBA Microloan.
As a general rule, the lower the minimum credit score requirement, the more likely it is to be a “soft” minimum.
Improve Your Credit Score
While not the fastest or easiest option, one of the best ways to deal with a low credit score is to, well, improve your credit score. If you don’t need the money right away (SBA loans aren’t known for being fast anyway), it may be worth settling your existing debts and repairing your credit with some strategic credit card usage.
Not sure where to start? Check out our 5 Ways To Improve Your Personal Credit Score feature.
Try Other SBA Lenders
Remember that you aren’t (usually) directly applying for a loan with the SBA. You’re applying through a lender. While two lenders may both offer SBA loans, they may have different approaches toward guiding you through the application process. Some online lenders even specialize in SBA loan applications and seek to make the process as painless as possible for prospective borrowers.
Seek Alternative Sources Of Funding
If it looks like your credit score has completely locked you out of getting an SBA loan, that doesn’t mean you can’t get financing at all. While you may not be able to access as sweet of terms and interest rates as an SBA loan could get you, you can still qualify for term loans and lines of credit even with a poor credit score.
SBA Loan Credit Score Requirements: Final Thoughts
Congratulations, you now know the minimum SBA loan requirements on credit scores for each of the SBA’s major loan programs. However, we’ve barely scratched the surface of how these complex programs work. Be sure to arm yourself with all the knowledge you need to make the best borrowing decisions for your business: