Most people are familiar with the three major credit scores: Equifax, Experian, and TransUnion. Information from these bureaus are used by lenders to determine your creditworthiness, and they can have a big impact on your ability to get a loan, rent an apartment, or even get a job.

But there’s another credit score that’s just as important, and it’s one that most people have never heard of: the Small Business Scoring System (SBSS). The SBSS is used by lenders to assess the creditworthiness of small businesses, and it can be just as important as your personal credit score when it comes to getting financing for your business – and can make or break an SBA loan application.

What is an SBSS score?

An SBSS score is a credit score that is used to assess the creditworthiness of small businesses. It is calculated by FICO, a leading credit scoring company, and ranges from 0 to 300, with 300 being the highest score. A higher SBSS score indicates a lower risk of default, and businesses with higher SBSS scores are more likely to be approved for loans.

The history of SBSS scores

SBSS scores were created by FICO, or Fair Isaac Corporation. The scores were developed in response to the growing demand for small business loans. At the time, traditional credit scores were not always reliable predictors of the creditworthiness of small businesses because small businesses often have less credit history than individuals, and their financial statements can be more complex.

SBSS scores were designed to address these challenges. They are calculated using a proprietary algorithm that takes into account a variety of factors, including the business’s payment history, time in business, and industry.

What are the components of an SBSS score?

The SBSS score is calculated using a proprietary algorithm that takes into account a variety of factors, including:

• Payment history: The business’s payment history on loans, lines of credit, and other debt obligations.
• Financial statements: The business’s financial statements, including its balance sheet, income statement, and cash flow statement.
• Industry: The business’s industry and the risks associated with that industry.
• Length of time in business: The length of time the business has been in operation.
• Management experience: The experience of the business’s management team.
• Personal credit history of the business owner: The personal credit history of the business owner or owners.

How is SBSS score important to qualifying for a business loan?

SBSS scores are becoming increasingly important in the business loan approval process. Lenders use SBSS scores to assess the risk of lending money to small businesses. Businesses with higher SBSS scores are more likely to be approved for loans, and they may also be able to get better interest rates.

Since 2012, the SBA has also used SBSS scores as a qualifying factor for loan approvals for the majority of its programs.  Typically between a minimum of 135 and 155, businesses with scores below the program threshold will be denied.  However, many lenders implement their own, high threshold, frequently running to 160 or more, program depending.

How to improve your SBSS score

There are a number of things you can do to improve your SBSS score. These include:

• Pay your bills on time. This is the most important factor in determining your SBSS score.
• Keep your credit utilization low. This means using less than 30% of your available credit. For example, if you have a $10,000 credit limit on your business credit card, you should keep your balance below $3,000.
• Maintain a healthy balance sheet. This means having a positive net worth and a low debt-to-equity ratio.
• Maintain your personal credit. The personal credit of business principals is a factor in SBSS scoring.
• Build a positive history of business borrowing. If you have a history of borrowing money from lenders and repaying it on time, this will help to improve your SBSS score.

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