Small business loans guaranteed by the U.S. Small Business Administration have a lot going for them: They carry low interest rates, offer longer repayment terms, require low down payments, and can be used for a variety of purposes. They also help you build business credit.
So it’s good news for small business owners that the SBA approved a record number of loans this year. In all, the SBA reports it approved more than 70,000 loans to small businesses in 2016, totaling $28.9 billion, which supported nearly 694,000 jobs. Furthermore, women-, veteran-, and minority-owned businesses also received more funding this year.
The administration’s continued efforts to improve lending access to minority business owners resulted in a record $8.65 billion loaned in underserved communities. It lent $7.3 billion to women-owned businesses, up $253 million from 2015. Veterans also received more than $1.36 billion this year, which is up 4% from the previous year.
If you’re in search of financing, an SBA loan might be the right choice for you, and you might wonder if the latest news signals that you stand a better chance of getting approved. However, let’s take a look at what this might truly mean for your business.
The Challenge Many Business Owners Face
The downside to SBA loans is that they require strong credit. SBA loan applicants are pre-screened using a small business credit score known as the FICO SBSS score, which you can check through a Nav Premium Plus account (learn more here). It ranges from 0 to 300, and the minimum score for the SBA pre-screening process is 140. (Most lenders set a minimum score of 160.)
SBA loans also favor businesses with a longer history (two years or more), and might require collateral. If you fall short in these categories but need financing soon, you might not qualify.
So let’s talk about your business credit score, since it’s an important factor in many business-related transactions anyway—including financing, vendor relationships, and potential partnerships. Although a lower score doesn’t necessarily prevent you from getting financing, nor from otherwise doing business, a higher score can make it easier to get approved, and with better terms.
If you’re not sure what your business credit score is, count yourself among the 72% of business owners who don’t, according to a recent survey by Nav and Manta. However, now is a great time to get acquainted with it and find out how to build it up—whether or not you’re in need of financing soon. A good business credit score takes time to build, but it will serve you well once you have it.
What if You Don’t Qualify for an SBA Loan?
If you don’t qualify for an SBA loan right now, there are dozens of financing options out there. If you’re interested in learning more about the over 44 different types of financing, here’s a breakdown. Each one comes with different terms, rates and qualification requirements—which can be confusing.
It takes an average of 26 hours to search and apply for credit for your business. But Nav has a free tool that can match you with financing you’re more likely to qualify for, which can cut your search to a fraction of the time.
Nav connects you to business financing offers that you are more likely to qualify for based on your business needs and credit — all without a hard credit pull. See my top options now.