Why Your Credit Score Isn't Everything

If you've ever been declined by a bank and assumed funding was out of reach, this article is for you. Your FICO score is just one signal in a larger picture — and for most business funding products, it's not even the most important one.

Why banks rely so heavily on credit

Banks use credit scores because they're fast, standardized, and predictive — for the kinds of borrowers banks serve. Banks are making long-term, collateral-based loans to established businesses. For those situations, personal credit history is genuinely meaningful.

But a merchant cash advance isn't a bank loan. It's a short-term advance against future revenue, and the repayment comes directly from your bank account. The lender's risk is tied to your business's ongoing cash flow — not your personal credit history from 2019.

What lenders actually look at

When Luma reviews an application, here's the real hierarchy of what matters:

1. Monthly revenue — This is #1. A business doing $40K/month with consistent deposits is a strong candidate regardless of credit score. Revenue proves you can repay.
2. Bank statement health — Lenders look at your last 3–6 months of bank statements. They're looking for consistent deposits, manageable NSFs (non-sufficient funds), and no chronic overdrafts.
3. Time in business — Six months is the common minimum. Two or more years opens more products and better terms.
4. Industry — Some industries are considered higher risk (restaurants, bars, trucking). Others are considered stable (healthcare, professional services). This affects terms, not necessarily eligibility.
5. Credit score — At Luma, we work with business owners with credit as low as 550. Below that, options narrow significantly. But a 580 with $40K/month in consistent revenue will often outperform a 700 with $8K/month and three overdrafts.

What a lower credit score actually affects

We're not saying credit doesn't matter at all. Here's what it realistically affects:

• Amount offered — Lower credit may mean a more conservative initial offer
• Factor rate — Less creditworthy applicants may see slightly higher factor rates
• Products available — Some products (DSCR loans, commercial real estate) do have higher credit minimums

What it doesn't affect: whether someone at Luma will treat you with respect and give you an honest assessment of your options.

A word on improving your position

If your credit is below 550 and you're not eligible for funding today, here's what actually moves the needle within 6–12 months:

• Pay down any accounts in collections — even settling for less than owed helps
• Keep existing credit utilization below 30%
• Don't open new credit accounts (hard inquiries reduce score temporarily)
• Focus on building 12+ months of clean bank statements

And come back. Many business owners who didn't qualify initially come back in six months and get funded. The door isn't closed — it's just not open yet.

The first step is free

Checking your eligibility at Luma takes about a minute and doesn't impact your credit score. You'll get a straight answer — not a runaround. If you don't qualify today, your advisor will tell you exactly what would need to change.