Do I Need Business Credit to Get a Loan for My Business?

Estimated read time 3 min read

Building personal credit is difficult enough, but it’s even more difficult to build business credit. As a result, you might be wondering whether you can secure a business loan with bad or no business credit. Most lenders will look at your business’s credit score when applying for a loan. However, that doesn’t necessarily mean that you need stellar business credit to secure a loan.

Do I Need Business Credit to Get a Loan for My Business?

The Basics of Business Credit

Business credit is a measurement of your business’s ability to satisfy its financial liabilities. There are several major credit bureaus that track business credit, including Experian, Equifax and Dun & Bradstreet. While each bureau has its own system for calculating business credit, they generally look at the following criteria:

  • Payment history from the past 12 months
  • Late payments
  • Date when business was launched
  • Credit lines open or applied for
  • Debt-to-credit ratio

Why Lenders Look at Your Business Credit

Some, though not all, lenders will look at your business’s credit score as part of their loan evaluation process. After all, lenders want to know that your business will be able to repay the borrowed money. If your business has bad credit, the lender may view your business as having a high risk of default, in which case the lender will likely reject your application for a loan. Good business credit, on the other hand, gives lenders peace of mind knowing that your business is financially responsible and capable of repaying the loan.

Getting a Loan With Bad or No Business Credit

The good news is that you don’t need good business credit to get a loan for your business. There are numerous ways to secure a business loan with bad business credit or even no business credit. You can offer a personal guarantee, for example, that involves tying your personal assets to the business loan. If you don’t repay the loan, the lender can go after your personal assets.

Another way to get a business loan with bad or no business credit is to offer collateral. Known as a secured business loan, it’s a popular financing method for startups and other businesses with little or no business credit. With a secured loan, you place assets owned by your business up for collateral. That way, the lender has recourse available in the event of default.

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