Getting a credit union business line of credit can help your company get access to the liquidity it needs to expand, initiate marketing campaigns, hire staff and do a constellation of profit-friendly things.
But what happens if your personal credit is less than stellar or your business’s financials are in such a good shape?
Well, things may be a bit difficult—but approval is not totally impossible.
Read this article to learn more.
To get a business line of credit from a credit union:
- Learn What a Business Line of Credit is.
- Determine How Much You Need to Borrow.
- Check Your Eligibility.
- Choose a Credit Union.
- File Up Your Documents.
- Submit Your Documents.
1. Learn What a Business Line of Credit is
In doing business, it is common knowledge that accessing a consistent flow of working capital keeps the business alive and thriving.
Needs may arise at different points in business that will require a large chunk of dollars. Therefore, every business must have a healthy cash flow. However, life won’t always be straightforward.
Especially for small businesses, no matter how successful, dipping into the business’s cash can tamper with the company’s stability and delicate balance.
It is where a financing solution such as a business line of credit becomes relevant. While there is the option of a traditional loan, a business credit line has specific advantages.
Take a look at these characteristics of a line of credit:
- Non-fixed: Unlike the traditional loaning system, a line of credit doesn’t have a fixed rate for repayment. In essence, you can pay back at any time.
- Not Loan Sum: You don’t have to cash all the loans simultaneously. Line of Credit permits you to withdraw whatever amount you need, at whatever time, so long as it is within the agreed range of cash loaned to you.
- Self-renewing: One of the best features of a line of credit is that whenever you repay the amount withdrawn, it becomes available for use again. Interesting, isn’t it?
2. Determine How Much You Need to Borrow
To get a business line of credit, determine how much you need to borrow. With this knowledge, you don’t sign up for too little or much.
Loan amounts normally max at $250,000 but can vary depending on the credit union. And, as part of its advantage over traditional loans, the business line of credit doesn’t charge a total interest on this amount. Rather, the interest is based on the amount you use.
For example, if you borrowed $250,000 and spent only $50,000, you will pay interest only on the $50,000 spent, which is good news—but do not fall for the trap of spending more than you can handle.
3. Check Your Eligibility
Your chances of getting a loan are often determined by your creditworthiness based on other factors that the bank considers. Therefore, to get a business line of credit from a credit union, check your eligibility.
Most loan platforms focus on your credit score, assets that can be used as collateral, business history (how long the business has existed), and business revenue. Generally, to qualify for a business line of credit:
- Your credit score must be 660 or higher. The personal score limit varies, though, depending on the lender.
- Your annual business revenue must be $25,000 or higher.
- You must have spent at least six months in business. The longer a business has existed, the more credible it appears to lenders.
- It would help if you had collateral to secure your line of credit.
Lenders also check your current debt schedule to ascertain your ability to pay back the line of credit.
>>>PRO TIPS: How Business Lines of Credit Work
4. Choose a Credit Union
To get a business line of credit from a credit union. Out there, you would find scores on scores of lending platforms: from physical to online structures. It now becomes your duty to conduct due diligence to find out which credit union—online or offline—is best suited to you.
Find out what their maximum lending limit is, their charges on different grounds, their requirements or eligibility requirements (refer to step 3), APR ranges, and so on.
Also, check out their security, strengths, and weaknesses. Remember that credit unions often favour lenders with high personal credit scores, high business revenue, and longer business histories.
Suppose you do not need these requirements, or it may be difficult for you to get a business line of credit from a credit union. But don’t panic! There’s a chance for you with online lenders, but be ready to face higher interest rates.
5. File Up Your Documents
The next step in getting a business line of credit from a credit union is filing your documents. After checking your eligibility and choosing a credit union, file your documents.
In cases where you are unsure which documents to include and which to exclude, there is room for contacting the lending platform for directions, which isn’t so hard.
However, credit unions usually request for:
- Personal and business tax returns
- Personal and business bank statements
- Business plan
- Business licenses
- Articles of incorporation
- Financial statements
- Profit and loss statements
- Building lease
>>>GET SMARTER: How to Get a Startup Business Line of Credit With Bad Credit
6. Submit Your Documents
Here is the final step. Gather all documents, file them up and submit them to the platform of your choice. You can do this both in person or online, depending on the choices made available by the platform you choose.
Conclusion
Getting a line of credit from a credit union can be easy and swift or dragging and strenuous. The former can be your case if you follow these steps.
First, learn what a business line of credit is, determine how much you need to borrow, check your eligibility, and choose a credit union. When you do these, file up your document and submit them.
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