What is the Small Business Scoring System (SBSS) and how does it affect my ability to get a SBA loan is a question we at Common Funding field on a daily basis. The SBSS Score ranges from 0-300 and is the main scoring model used by the Small Business Administration (SBA) on scoring small to medium sized loans. In layman terms, it’s a score given to a small business applicant that helps dictate the overall financial stability of a commercial borrower (aka the ability to repay), much like a personal credit score for an individuals ability to repay consumer debt.
Who created the score and why?
The scoring model was created by FICO (Fair, Isaac and Company) in the early 90s. The main purpose of the SBSS score is to give lenders the ability to quickly and accurately rate a borrowers credit risk, the lower the score, the higher the risk.
How does a scoring system benefit an applicant?
The less time lenders spend evaluating a borrower, the lower the cost of the capital. Not to mention, the less time lenders spend evaluating means getting borrowers the capital they need in the time frame they need it.
When does the SBSS score apply?
Anytime a borrower is looking to acquire a SBA loan less than $350,000 a borrower must score above 140 to be SBA eligible. That being said, most SBA delegated lenders (lenders who have the ability to make decisions without prior review by the SBA) require a much higher score. Because Common Funding has spent hundreds of man-hours defining each lenders credit box, we have a detailed understanding of the score requirements for each one of our partners.
What affects the SBSS score?
There are dozens of variables that come into play, for example:
- Personal credit score
- Payment history – (business and personal)
- Age of business (startups are scored more aggressively)
- Geographical location
- Industry risk grade
- and more
How does working with Common Funding benefit borrowers in regards to the SBSS score?
Because Common funding has a detailed understanding of the SBSS, we ask screening questions that help us understand borrowers eligibility before placing them with a lender. Therefore, our applicants have a dramatically higher likelihood of being placed with a lender who is going to finance their project the first go around.