Can You Get a Loan from the US Small Business Administration Without a Credit Score?

Introduction

For many small business owners, securing loans can be a challenging endeavor, especially if they lack a solid credit score. In particular, the US Small Business Administration (SBA) is often a sought-after funding source, but a daunting question remains:

Can you get a loan from the US SBA if you have no credit score?

Understanding the US SBA’s Credit Score Requirements

Credit card occupancy is not a strict requirement to obtain a loan from the US SBA, but having a good credit score and your primary bank's financial standing can significantly improve your chances of approval.

However, the SBA does not rely solely on personal credit scores during the loan application process. Instead, it utilizes the FICO Small Business Scoring Service (SBSS) to assess loan applicants (source). This service calculates a business owner's credit bureau data, financials, and other relevant factors, producing a score between 0 and 300. The current minimum SBSS score required for loans up to $350,000 is 155.

The Role of the FICO Small Business Scoring Service (SBSS)

The SBSS is a critical component of the SBA's loan application process. Rather than focusing on personal credit scores, it provides a more comprehensive evaluation. By considering a broader range of factors such as credit history, financial stability, and business health, it aims to identify applicants who have the potential to successfully manage and repay their loans.

Navigating the Rejection Process

It's important to note that even without a credit score, prospective borrowers may still have the opportunity to apply for an SBA loan. However, the SBA primarily partners with banks to ensure funding. If a bank denies your application due to a lack of credit score, they may not even submit the application to the SBA, as the SBA serves as a backup funding source to ensure that borrowers have access to loan options even when traditional lenders turn them down.

Alternatives to Consider

If your application is denied by both banks and the SBA due to a lack of credit score, there are still other options to explore. Here are a few alternative sources and strategies:

Microloans: Organizations such as Accion and Comerica Bank offer microloans, which can be a viable option for businesses with limited credit histories. These loans typically have lower amounts and more flexible repayment terms. Business Incubators and Accelerators: Many business incubators and accelerators provide financial support to startups. They often look for promising businesses that show potential for growth and may offer loans, grants, or even mentorship. Community Development Financial Institutions (CDFIs): CDFIs focus on supporting underserved and underrepresented communities. They often offer loans to businesses that may be overlooked by traditional lenders due to credit score limitations.

Conclusion

While having a credit score can be advantageous, it is not the only factor that determines whether you can get a loan from the US Small Business Administration. The FICO Small Business Scoring Service (SBSS) offers a more holistic approach to evaluating loan applicants, making it possible for businesses without a credit score to secure funding. It is crucial to explore all available options and, if necessary, seek support from alternative sources to finance your business growth.