How To Get A Small Business Line Of Credit

A small business line of credit is a popular form of financing among entrepreneurs because of
its flexibility and convenience.
If you’re interested in this financing solution but are not sure how you can get one, you’ve come
to the right place. In this article, we’ll discuss the simple steps you need to take to get a
business line of credit for your company.

1. Assess your business’ borrowing health

Before sending out any applications, first get an idea how well your business qualifies for a
line of credit. This will save you time and effort from applying to incompatible lenders.
Different lenders have different requirements, but in general, these are the factors that affect
their decision when evaluating applications:
Credit score — Many lenders look at your personal and/or business credit score to gauge how
risky your business is. Some lenders have a minimum credit score requirement, so a good
credit rating means you’ll have more options and better terms and interest rates.
Annual revenue — Most lenders have a minimum revenue requirement. They look at your
company’s annual revenue to make sure that your business earns enough money to pay back
any money you borrow.
How long you’ve been in business — Some lenders only accommodate more established
businesses.
Collateral — Are you willing to offer any collateral to secure the credit line? Different lenders
accept different kinds of collateral but the most commonly accepted ones are real estate,
machinery, and inventory.

2. Compare your options

Now that you have an idea how likely it is that lenders will approve your application, compare the different options for line of credit for small business you have.
If your credit score is good and your business has a high revenue and is more than two years
old—especially if you have collateral that can back any money you borrow—you can get your
small business line of credit from both traditional lenders and alternative lenders online.
If you’re interested in a high credit limit, a long repayment period, and/or a low interest rate, your
best bet is to get a bank or SBA line of credit.

Note, however, that such traditional lenders ask for a lot more requirements compared to
alternative lenders, and also take weeks or even months to evaluate applications and release
funds. So, if your business has high qualifications but you don’t want to spend a lot of time and
effort gathering the needed documentation and waiting to be approved, alternative lenders are
the way to go.

Now, if your credit score is less than ideal or if your business is still new, you will likely not
qualify for a business line of credit from conventional lenders. There are many online lenders,
however, that welcome newer and smaller businesses and that do not put much emphasis on
the owners’ credit scores.

Alternative lenders typically offer more expensive lines of credit compared to banks, credit
unions, and other traditional lenders. However, they have simple and convenient application
processes and a speedy funding time.

Another important thing to consider when evaluating your options is the total cost. Don’t just
compare interest rates; check if the lenders charge other fees and how much those fees are.
Some common fees include withdrawal fees, non-use fees, payment processing fees, late fees,
termination fees, and prepayment fees.

3. Prepare the requirements

Now that you know which business lines of credit you qualify for and meet your needs, the next
step is to prepare the requirements.

These requirements depend on the lenders but the common ones include:
 Basic personal information (such as name, ID, and social security number) and business
information (such as business name and tax ID number)
 Personal and business credit scores
 Tax returns
 Business financials, such as annual revenue, bank statements, and balance sheets
 Debt schedule
 Contracts and other legal documents

4. Complete your application

Got your requirements ready? Then it’s now time to apply.
To avoid unnecessary delays (or rejections), review the application form and all
documentation before submitting them, to make sure that everything in there is accurate and
complete.

If you’ve chosen an online lender, you can expect to finish the online application process in just
a few minutes and to get approved within a business day or two.
For business lines of credit from conventional sources, the application can take anywhere from
a few days to a few months and may require you to make an in-person visit to fill out additional
forms or answer questions.

Bottom Line

A small business line of credit is a great financial safety net in case of cash flow hiccups or
unexpected opportunities. To have one in your arsenal of business tools, first assess thequalifications of your business, then compare your options and prepare the requirements you
need to apply.