When applying for an SBA loan, your SBSS Score has a big impact on whether your application is accepted or rejected.
If you’ve never heard of the SBSS Score or are looking for ways to improve your score, this article is for you.
What is the SBSS Score?
The SBSS Score, or Small Business Scoring Service (SBSS) score, measures how likely your business is to pay back a loan on time and in full. The score draws on both your personal credit rating and, if you have one, your business credit rating. It also considers other information, such as the age of your business, number of employees, and business revenue. The score ranges from 0-300, and a higher number is better than a lower number.
Why Should You Care?
The SBSS Score is your gateway to an SBA loan. The SBA uses the score to screen applications for 7(a) loans under $350,000.The minimum score to pass the SBA’s screen is currently 140. However, most lenders, including SmartBiz lenders, set their minimum score higher. Not quite there yet? We’ll tell you how to increase your SBSS Score in the next section.
In addition to SBA loans, lenders often use the SBSS Score as a pre-screening measure for other types of business loans under $1 million.
The SBSS score is a hybrid score which considers both your personal and business credit rating. For that reason, it gives a holistic view into your creditworthiness as a borrower, so lenders place a lot of value on this metric.
How to Improve Your SBSS Score
Here are some actionable steps you can take to improve your SBSS Score.
1. Pay personal and business bills on time.
Payment history accounts for 35% of your personal credit score and an even bigger chunk of your business credit score. As a result, paying bills on time is the surest way to increase your SBSS score. One tip in this regard is to set up autopay for your bills.
For business bills, we recommend paying early if possible. On your business credit report, suppliers are permitted to leave notes about your payment activity (e.g. “pays on time,” “pays early,” “habitually late,” etc.), and comments that you pay early encourage suppliers and lenders to work with you.
2. Establish a business credit file.
If you don’t have a business credit file, you can easily create one by doing the following:
- Get a D-U-N-S number for free from business credit bureau Dun & Bradstreet. A D-U-N-S number, which stands for Data Universal Numbering System number, is a unique 9-digit identification number that’s used to identify your business in credit reports.
- Gather positive trade references from 3-4 suppliers that you’ve worked with. Ask them to report your payment history to the business credit bureaus.
- Open a business checking account.
- Apply for a business credit card, and use it responsibly.
Some business credit bureaus, including Experian and Equifax, will create your business credit file by pulling from public record data. However, being proactive and taking the steps above on your own will help build your credit and increase your SBSS Score.
3. Pay down outstanding debt and reduce credit utilization.
After payment history, the next biggest impact to your SBSS Score is your level of outstanding debt. Focus on first paying off high-interest-rate debt, such as student loans and credit card debt. Then, tackle other debt such as mortgage and auto loans. Going forward, try to pay your credit card bills in full each month so you don’t have carry over balances.
If you need help managing debt, contact your creditor or lender. Sometimes, they will agree to accept a lower payment on an outstanding bill or work out a payment plan with you.
4. Use credit responsibly.
Limiting your use of credit will help you achieve a higher SBSS Score. This is called credit utilization. Ideally, you should aim to utilize no more than 30% of your credit across your accounts. For example, if your credit limit on a credit card is $10,000, you should not charge more than $3,000 on it each month.
5. Don’t apply for too much credit.
Many people make the mistake of applying for every business loan that they think they are a good candidate for. This can actually backfire and hurt your chances of getting a loan. Every time you apply for credit, the lender will do a hard pull of your credit, which can dent your score by up to 5 points. This is true of both SBA lenders and providers of short term working capital loans. 5 points may not seem like much, but it adds up quickly and can significantly impact your loan eligibility if you have borderline credit. It’s best to be strategic and apply with only 2 or 3 lenders.
6. Fix errors on your personal and business credit reports.
The final tip to improve your credit is to fix errors on your personal and business credit reports. More than 80 % of personal credit reports and 25 % of business credit reports contain errors! Errors can be anything from wrong demographic information about you to listing an account that isn’t yours to listing delinquent accounts that you were timely on.
If you find an error on your personal credit report, you can dispute it online with the credit bureaus, who then have 30 days to investigate the issue with the creditor and get a response back to you. It’s free to file a dispute, but you should include documents that support your claim that an error was made.
If you find an error on a business credit report, you should notify the business credit bureau and the creditor that made the error as soon as possible. There’s no formal process for fixing errors on a business credit report, but working with the business credit bureau and the creditor will usually get the problem fixed.
The SBSS Score is central to your SBA loan application. To get it at its best and improve your eligibility for business financing, follow the 6 tips above!
About the Author
Thank you to Fit Small Business writer Priyanka Prakash her contribution. A business analyst and writer, Prakash's areas of expertise also include small business lending, credit cards, credit scores, and other aspects of small business finance.