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
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.
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.
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.
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.
unions, and other traditional lenders. However, they have simple and convenient application
processes and a speedy funding time.
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.
Now that you know which business lines of credit you qualify for and meet your needs, the next
step is to prepare the requirements.
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
Business financials, such as annual revenue, bank statements, and balance sheets
Contracts and other legal documents
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
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.
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.