Navigating Credit Scores for Small Business Loans

Credit scores are essential for small business owners and are necessary for Community Development Financial Institutions (CDFIs) in the loan application process. CDFIs 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 essential to CDFIs, they are not the only factor considered when evaluating a loan opportunity. Pathway examines factors like business cash flow, collateral, and the entrepreneur's experience. We believe your opportunity and the potential impact the loan could have on starting and growing your business and the impact on your community.

This doesn't mean your credit score is not used or not important. To the contrary, it is crucial! 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 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 a business's financial health and payment history.

When applying for a small business loan, personal and business credit are important factors that lenders consider, including Community Development Financial Institutions (CDFI). While a strong business credit score can demonstrate the business's financial stability, 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 their 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 needs improvement, talking about it with a financial expert is helpful.

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

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