Credit score for a small business loan: banks, online lenders, MCAs

What credit score do small business lenders look for?

Each lender writes its own minimum, and none is set by law for ordinary business loans. Even SBA, which guarantees loans for other lenders, publishes no score cutoff, and credit score for an SBA loan covers what its rules ask lenders to check instead.

What most lenders read:

• The owner's personal credit report and score. For a young or small company this often carries the most weight, because the business has little history of its own.
• Business bureau scores. Dun & Bradstreet's PAYDEX, Experian's Intelliscore Plus and Equifax's business scores measure how the company pays suppliers and lenders. The business credit scores guide decodes each scale.
• Cash flow. Bank statements, tax returns and the payment the business can carry.
• Time in business, industry and collateral.

The Federal Reserve Banks' Small Business Credit Survey gives a public yardstick for where scores land. It treats a personal score of 720 or higher, or a business score of 80 to 100, as low credit risk. A personal score of 620 to 719, or a business score of 50 to 79, is medium risk. Anything below those is high risk. When a firm reported both scores, the survey used the riskier one, and by that measure 72% of employer firms were low risk, 22% medium and 6% high.

Approval rates by lender type, from the Fed's survey

The 2025 survey, fielded September 3 to November 14, 2025, drew 6,525 responses from employer firms with 1 to 499 employees. Among firms that applied for any financing, 42% got the full amount, 36% got some or most of it and 22% got nothing.

For applicants seeking loans, lines of credit or merchant cash advances, the survey reports outcomes by lender:

Small banks had the highest full approval share of any lender type in the survey. Large banks, online lenders and small banks were the most-used sources, in that order. These are survey results across thousands of firms, not odds for any one application.

Banks, online lenders and equipment financing

Banks lean on documentation such as tax returns, financial statements, collateral and a personal guarantee. Expect more paperwork and a longer wait. Bank borrowers in the Fed's survey were also far less likely to report that costs ran higher than expected.

Online lenders are growing fast. The share of applicants that applied at online fintech lenders rose from 17% in 2020 to 29% in 2025, according to the survey. They often decide quickly and lean on bank account data, but the costs surprised many borrowers. Sixty percent of firms that borrowed from online lenders said actual costs were higher than expected, compared with 37% at small banks and 32% at large banks. High interest rates and unfavorable repayment terms were the most common complaints.

Equipment financing works differently because the machine, truck or oven secures the loan. If the business stops paying, the lender can take the equipment back. The equipment's value becomes part of the decision, next to the owner's credit and whether the business's cash flow covers the payment.

Why a merchant cash advance isn't a loan

A merchant cash advance (MCA) is a lump sum paid against your future sales. The Federal Reserve describes it as "the sale of future receivables for a set dollar amount." You don't borrow and repay principal with interest. The provider buys a slice of your future card or bank receipts and collects "a set percentage of the business's daily sales receipts" until it has the agreed total.

Because it isn't structured as a loan, an MCA is priced with a factor rate, a multiplier applied to the advance, instead of an APR. One provider in the Fed's review showed factor rates "usually between 1.14 and 1.48." The Fed found MCA descriptions often include "little or no information about the actual costs and repayment terms," and it notes that Truth in Lending Act rules generally don't apply to business credit at all.

Example, using the Fed's own illustration of $50,000 advanced for $65,000 in future receipts (a factor of 1.30):

On the MCA side, if card sales average $3,000 a day, the 15% holdback is $450 a day, and $65,000 takes about 144 business days to collect, or roughly seven months. Slower sales stretch the time and lower each day's payment. The loan column is an illustration with a round rate, not a quote.

The trade is speed and flexible daily payments against a much higher dollar cost. Run the same comparison with your real offers before you sign.

Personal guarantees put your own credit on the line

A personal guarantee is your promise to repay the business debt yourself if the company can't. Most owners who borrow sign one: 59% of employer firms with debt in the Fed's survey had used one, and 38% had pledged personal assets, up from 31% in 2019.

On SBA loans the guarantee is written into the rules: owners of 20% or more generally must sign one.

What a guarantee means for your personal credit depends on how the lender reports the account, and business lenders don't all handle it the same way. Ask before you sign, and read business vs. personal credit for how the two files connect. Business cards follow their own rules, covered in business cards that report to personal credit.

Why lenders turn small businesses down

Among firms in the survey that weren't approved for at least some financing, the reasons they reported were:

Firms could name more than one reason, so the column adds to more than 100%. Credit score sits third. Existing debt, which also shows up on your credit report as balances and payments, ranks ahead of it.

Your next steps, in order

1. Pull your personal reports. Get all three at AnnualCreditReport.com, fix real errors and pay card balances down before the statement dates.
2. Build the business file. Get a D-U-N-S number and open supplier accounts that report. Building business credit with an EIN lists what actually reports.
3. Match the lender to the job. A truck or an oven is a natural fit for equipment financing, where the equipment secures the debt. For uneven cash needs, a line of credit lets you draw and repay; long-term growth usually calls for a term or SBA loan.
4. Apply at a small bank or credit union you already use, since your deposit history is easy for them to verify.
5. Compare total dollars as well as the payment. For any MCA or online offer, multiply out what you'll repay in total and set it next to a loan quote.
6. Ask how the account reports and what you're guaranteeing before you sign anything.