Business Line of Credit: 9 Smart, Proven Tips to Get Approved Fast, No Matter What

(April 2024)

Business Line of Credit: 9 Smart, Proven Tips to Get Approved Fast, No Matter What

In This Article

Do you know you can use a line of credit to prepare yourself for unforeseen circumstances as a business owner?

If you don’t, make your business flexible during expansion periods or unstable cash flow with a business line of credit. Do you want a line of credit for your business? If yes, read this article to the end to know how to get a business line of credit for your business.

To get a line of credit for your business

  1. Understand How a Business Line of Credit Works
  2. Understand When a Line of Credit Can Be Good for Your Business
  3. Check If You Are Eligible
  4. Determine the Amount of Cash You Need
  5. Evaluate Which Lender Is Most Suitable for Your Business’s Needs
  6. Consider Top Lenders
  7. Gather Your Application Paperwork
  8. Avoid Common Application Errors
  9. Submit Your Application

1. Understand How a Business Line of Credit Works

To know the requirements for a business line of credit, first get what this credit product is all about. With a business line of credit, you get the opportunity (not the obligation) to take out a loan when you apply.

If lenders approve your application, you get a fixed amount of capital in your account. Then borrow money against your credit limit and pay interest only on the amount you actually borrow.

To gain access to short-term funding, apply for a business line of credit in order to support your business expenditures—such as supplies and salary—to boost your inventory, or to maintain cash flow in your business.

2. Understand When a Line of Credit Can Be Good for Your Business

To know if a line of credit is important for your business:

  • Check if your business experiences seasonal fluctuations. Get a line of credit to enhance your business when your sales are low.
  • Examine how your customers pay for the goods or services you deliver. If your buyers delay their payments, opt for a line of credit to cover your business expenses.
  • Get a business line of credit to pay for the cost of labor or supplies in your business.
  • Use a line of credit to pay for equipment or inventory you have the opportunity to buy at a reduced price.

3. Check If You Are Eligible

To access your qualification for a business line of credit, check your personal credit history and your business’s credit history (if applicable). Lenders want to know how long you are in your business. Also, most lenders want to see if you can repay your loan, therefore they also examine your credit score.

Evaluate your business’s financial situation. Check your business’s financial statements to know your annual revenues. Determine if you can repay the business line of credit. A good business’s financial situation tells you that you can pay back the business line of credit.

Familiarize yourself with other requirements (time in business, licenses, and permits, business assets, etc.)

4. Determine the Amount of Cash You Need

To estimate how much money you need for a business line of credit, evaluate your operational cash flow needs. Consider your potential lenders because most lenders generally offer business lines of credit ranging from $2,000 to $250,000.

Request more than you need, as you only pay interest only on the amount you spend. Practice financial discipline to ensure you don’t spend more than you can repay on time. Request a line of credit increase if you need more funds after your initial line of credit.

Be ready to use collateral in case your lender asks for it.

Run the numbers to make sure you can actually repay the business line of credit.

5. Evaluate Which Lender Is Most Suitable for Your Business’s Needs

To apply for a line of credit for your business, compare your lenders to know which one is best for you. To find a suitable lender for your business needs, consider these three major institutions.

  • Banks: Prepare for stricter lending requirements when considering a bank as your potential lender for a business line of credit. Expect demand for higher credit scores as part of the requirements for a business line of credit. However, banks generally offer lower rates than other lending institutions.
  • Credit Unions: You can enjoy low interest rates just like banks with credit unions. But you need to be a member to get a business line of credit. To join a credit union, be a member of a community to which the union belongs, for example.
  • Online Lenders: Enjoy fast and simpler application processes with online lenders. Focus more on your cash flow than your financial statements. Choose online lenders if your business is new or small, as online lenders have more flexible criteria than banks or credit unions.

6. Consider Top Lenders

To find the best line of credit for your business, look for popular lenders with “bearable” interest rates.

Choose BlueVine, for example, and get a business line of credit between $5,000 and $250,000 with interest rates starting at 4.8%. Have a personal credit score of 600 to qualify for a BlueVine business line of credit.

Get $2,000 – $250,000 in a business line of credit when you choose American Express Business Line of Credit (formerly Kabbage). Have a minimum of 640 personal credit score. Interest rates range from 2% –9% for 6 months duration, 7.5% – 18% for 12 months, and 15.75% – 27% for 18 months.

7. Gather Your Application Paperwork

To obtain a business line of credit, get the necessary documents for the application processing. Get your personal and business tax return, business plan, and article for incorporation.

Also, add your personal and business bank statements to the list, including your financial statements. In addition, provide your profit and loss statement.

8. Avoid Common Application Errors

To easily collect a business line of credit, avoid Common mistakes in your application. Verify your contact information and other relevant details to check if there is any inaccurate data.

Use common contact details such as e-mail and phone number, so that your lender can reach out to you easily.

9. Submit Your Application

To seek a line of credit for your business, submit your application in person or online to your lender. Lenders may respond to you within five minutes or you may have to wait several days before you get feedback from your lenders.

Prepare to add additional information such as your name, business name, social security number, business Tax I.D. (E.I.N.), loan purpose and annual revenue.

Recap

To get a business line of credit, learn how a line of credit works and find the reason your business needs a line of credit. Check your eligibility for a line of credit and estimate the amount of cash you need.

Then compare lenders to know the best for your business needs. Choose top lenders and gather your important documents for the application.

Verify your credentials to avoid application errors. And finally, submit your application.

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