There are times when you might need additional funding to either grow your company or keep it running smoothly. In those cases, lenders may be able to offer various funding options that can help.
Generally, the higher your credit score, the more borrower-friendly loan products are available to you, and the more likely you are to qualify.
What is considered excellent credit?
Generally, 650 to 739 is a good credit score, 740 to 799 is very good, while above 800 is considered an excellent credit score. While the credit rating you’ll need to qualify for better loan options will vary by lender, the minimum score generally stays around 680. And as long as your other credentials suggest that you’ll reliably repay your debt, there’s a better chance you’ll be eligible for the loan.
4 small business loan options for excellent credit
Below are some of the most common business loan options available for borrowers with high credit scores. Many of these loans come from traditional lenders such as banks.
1. SBA loans
SBA loans are often seen as the gold standard in small business loans. While the Small Business Administration doesn’t lend money directly, it acts as a guarantor, helping banks minimize their lending risk. As a result, SBA lenders can offer higher-quality loans.
Small business owners with good credit scores may apply for several types of SBA loans depending on their needs. These loans include:
- SBA 7(a) loans. These SBA loans are the most highly sought-after. Their minimum loan amount is $30,000, and the maximum loan amount is $5,000,000. You can use them to cover commercial real estate purchases, working capital, and debt refinancing. Interest rates vary by lender.
- SBA 504 loans. The 504 (also known as Certified Development Company, or CDC) loan program is similar to the 7(a) loan program, except it’s primarily for real estate purchases. The maximum loan amount is $5,000,000, with rare $5.5 million loans. It’s generally regarded as one of the best options for real estate purchases because your bank funds 50% of the loan amount, and your CDC covers another 40%. That leaves you with only a 10% down payment.
- SBA microloans. Available solely to new or very small businesses, microloans provide a smaller amount of money to keep a business afloat or support a startup. The maximum loan amount is $50,000, though the average loan amount is closer to $13,000.
- SBA CAPLines loans. SBA CAPLines loans are working capital loans designed to cover short-term or cyclical needs. These loans are available as installment or revolving loans. You might qualify for SBA CAPLines loans if your business is seasonal or you’re a homebuilder, contractor, subcontractor, or construction contractor. Other types of businesses are generally ineligible.
2. Bank term loans
Bank term loans comprise any small business loans that banks offer beyond SBA programs. The maximum loan amount depends on the bank but typically maxes out at $500,000. Typically, bank term loans have more stringent qualification criteria than similar financing options, but often come with more flexibility in how you use the funds.
3. Business lines of credit
Unlike traditional loans, business lines of credit don’t give you a direct influx of working capital. Instead, the financial institution sets a certain amount of money that you can borrow against and then repay as needed. Typically, lines of credit have lending limits of around $100,000.
You don’t necessarily need an excellent credit score to get a line of credit from an alternative online lender. However, a credit score of around 700 may help you get better rates.
4. Business credit cards
A business credit card is similar to a line of credit, but with lower loan limits. The average limit for a business credit card is around $56,000, making them useful for small purchases. A business credit card with favorable rates typically requires a minimum credit score of around 690. However, there may be cards available through alternative lenders with less stringent qualification criteria.
Benefits of applying for a small business loan with an excellent credit score
Having an excellent credit score often opens the door to more attractive loan products. Below are just a few of the advantages that you and your business may stand to enjoy for working hard to achieve great credit.
Low interest rates
Many traditional loans that require a high credit score will have lower interest rates and longer repayment terms, which will typically have you spending less in the long term and give you lower monthly payments in the short term.
Better terms
Benefit to a great credit score is being able to secure favorable loan terms associated with traditional financing options. An alternative loan option will typically give you 6 to 18 months to repay a loan, along with typically high rates. Bank term loans can last anywhere from 24 to 60 months, while SBA loan terms may go up to 25 years.
Higher loan amounts
One of the main reasons business owners try to improve their credit scores is so it can help them qualify for access to more capital. A greater amount of money may help your small business expand into something larger with new equipment, staff, and retail space. You may say that great credit could be a direct line to better business.
Find high-value loans with SmartBiz®
Loan options with a high minimum credit score requirement can provide several long-term financial benefits. However, with such a large number of options, finding a loan that matches your needs can prove challenging. And where do you even start looking?
That’s where SmartBiz can help. Using your financial information, SmartBiz can search through lenders in your area and, with one streamlined application, find the loans best for your business. That means you save precious time during the application process. Check now whether you pre-qualify* for SBA 7(a) loans, bank term loans, and other funding options available.
