How Small Business Borrowers can Maximize their Borrowing Power

For a small business to survive, it’s usually imperative that the owner seeks outside financing - often a business loan. To help small businesses recover during the 2020/2021 pandemic, there are special funding options available like the Paycheck Protection Program (PPP). PPP loans can be fully or partially forgiven. However, this PPP funding might not be enough for a business to survive.

If you’d like to explore debt financing, you can apply to banks or other financial institutions. To increase your borrowing power and prepare for a loan application, take these steps first.

See if you pre-qualify!

Determine the reason you need funding

It seems obvious that a small business owner would know the reason for securing a business loan they need. However, that may not be the case in light of the spread of coronavirus and business interruption.

Some common reasons why businesses apply for funding is to shore up working capital, to buy machinery, to hire more staff, or even re-finance existing loans to reduce monthly costs.

Know the amount of the loan you’re seeking

Take time to look at your business plan and current financial situation before you start an application. Not knowing how much you need can stop the process dead in its tracks. Work with a financial professional to determine how much you need to reach your financial goals if you’re not sure.

Creating a working plan for your business can also give you solid direction. Our blog post, 2021 Small Business Planning, outlines how to adjust your budget, perform an analysis, and put strategies in place to reach your business objectives.

Review your business and personal credit scores

Your credit score not only impacts your ability to secure a loan, but it also influences certain factors like your interest rate and in some cases, the terms of your repayment. A credit score of about 700 is very good and significantly increases your chance of being approved for a loan.

Before you apply for a small business loan, take some time to get your personal credit history in order. Request your credit report from each of the major credit reporting agencies.

Business Credit Reports Explained outlines how your score is calculated and how you can raise yours. Once you have your reports, review them closely. If you see any errors on your credit reports, review this article: How to Dispute Your Credit Report.

If you’ve found that your scores are low, there are several ways to improve your FICO SBSS Score.


If you’ve determined that your score needs to be higher to qualify for an SBA loan, there are steps you can take to raise your numbers. Review the items below to get started.

Establish Business Credit

To help build your FICO SBSS score and give lenders a snapshot of your business creditworthiness, you need to establish a strong business credit profile. The first step is to apply for a D-U-N-S number through Dun & Bradstreet. To learn how to establish and why this number is important, visit the SmartBiz Loans Small Business Blog: Why Does Your Business Need a DUNS Number.

Work with Vendors

Next, contact vendors that you’ve worked with and ask them to report your positive history of payments to the business credit bureaus. The SBA has an article here that explores suppliers and how they affect your overall credit report.

Open a Business Checking Account

If you don’t already have a business checking account, open one ASAP. In addition to helping establish business credit, you’ll be separating your finances, making bookkeeping and accounting much easier.

Apply for a Business Credit Card

Finally, apply for a business credit card, to be used for business purposes only. Here are tips to help you configure your expenses accurately: How to Categorize Expenses for Small Business.

Watch Outstanding Debt

Outstanding debt has a big impact on your SBSS Score. Focus on first paying off high-interest-rate debt, such as student loans and credit card debt. Then, pay down 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 carry a balance.

Review your borrowing options

Review commercial banks available to you including your own business bank. A non-bank financial company like SmartBiz Loans can help. Instead of going bank to bank, our professionals match you with the one most likely to fund via the SmartBiz streamlined application and stellar customer service. This helps you avoid going from bank to bank, cutting into time you could spend running your enterprise.

Types of funding in 2021

Paycheck Protection Program (PPP) loans were put in place by Congress to address the economic downturn caused by the 2020/2021 coronavirus pandemic. These loans may be 100% forgiven.

Paycheck Protection Program (PPP) loans

Paycheck Protection Program loans can be fully or partially forgiven. To learn more about these loans and approved use of funds, visit the SmartBiz Loans website.

Let SmartBiz help you apply for a first or second Paycheck Protection Program (PPP) loan so you can protect and build your small business. Start a streamlined application.

SBA 7(a) Loans

A Small Business Administration (SBA) 7(a) loan is generally known as “the gold standard” in small business financing.

If you have an eligible SBA 7(a) loan disbursed prior to September 27, 2020, the SBA will pay 6 months of principal, interest, and any associated fees as a result of the CARES Act.

Bank Term loans

A Bank Term loan from lenders in the SmartBiz network is a short-term, fixed-rate loan with stable monthly payments. These loans are a great fit when you need funds quickly and want to lock in your interest rate. The same streamlined process is used for term loans through banks in the SmartBiz network.

Proceeds from a Bank term loan can be used in a variety of ways to meet your business goals. Funds can be used for working capital, debt refinance, new equipment purchase, and more. Additionally, paying off a Bank Term loan responsibly helps to build business credit.