Navigating Credit Scores for Small Business Loans

Credit scores are an improtant factor for small business owners, and they are an important factor for Community Development Financial Institutions (CDFI's) in the loan application process. CDFI's look at credit scores in combination with other factors—taking a more flexible and personalized approach compared to traditional lenders.

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How does a CDFI use credit scores in the loan application process

While credit scores are important to CDFI's, they are not the only factor that is considered when evaluating a loan opportunity. Pathway looks at factors like business cash flow, collateral, and the entrepreneur's experience. We consider your opportunity and the potential impact the loan could have on starting and growing your business and the impact in your community.

This doesn't mean your credit score is not used, or not important. To the contrary, it is important! It is just one piece of the puzzle though, and it is not typically a make or break.


Differentiating personal and business credit

Personal credit and business credit are two distinct entities that are used to assess a person's or a business's creditworthiness. Personal credit is based on an individual's credit history and financial behavior, while business credit is based on the financial health and payment history of a business.

When applying for a small business loan, both personal credit and business credit are important factors that are considered by lenders, including Community Development Financial Institutions (CDFI's). While a strong business credit score can demonstrate the financial stability of the business, personal credit scores are also considered because they provide insight into the individual's ability to repay the loan.


CDFI support for boosting credit ahead of a business loan

While CDFI's use credit scores as a factor in the loan application process, they also understand the importance of working with small business owners to help them improve their credit scores. Pathway Lending offers financial education and resources to help small business owners better understand credit and how to improve their scores. By working with a CDFI like Pathway, even long before a potential loan opportunity, small business owners can improve their chances of securing a future loan and achieving their financial goals.

Benefits of choosing CDFI like Pathway Lending for credit concerns

Working with a CDFI can provide several unique benefits for small business owners seeking financing. One of the main benefits is access to financial education and resources to help small business owners understand and improve their credit scores. We can also offer a more flexible loan process compared to traditional lenders.

Pathway wants to work with small business owners to find a loan solution that meets their specific needs and financial circumstances, even if your credit score is not as high as traditional lenders might require. This means that a low credit score is not a black and white decision.


Connect with a Pathway coach for credit and loan guidance

Whether your score is exceptional or in need of improvement, it is helpful to talk about it with a financial expert.

Pathway coaches are experts in their field—former executives, CPA's, and more with expertise ranging from accounting to sales & marketing. We're ready to help you and your business start and grow!

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