5 steps you need to take to get a business line of credit
Qualified business owners have a lot of tools at their disposal when it comes to getting a business line of credit. A quarter of a million is up for grabs, so it is by no means a small amount of money. If you have the means to get approved, repayment options are flexible enough to make the credit worthwhile.
1. Understanding the Credit
A business line of credit is a loan that has a company’s best interest at heart. It is a flexible small business loan without the same cons of a regular business loan. It mimics a traditional credit card and lets you borrow a specified amount, but you only pay interest on a portion of the amount used. This allows business owners to take out a larger than average loan without having to worry about rising interest rates. It’s low cost enough to not override your profits, and flexible enough to cover emergency shortages in inventory.
2. How Do You Get the Credit?
You can’t just write out a business plan and then get a loan for a hundred grand. Your business needs at least six months in the hole and a revenue of at least twenty-five grand. This is the bare minimum to qualify for a business line of credit. The same lenders that provide traditional business loans will handle a business line of credit. Don’t be surprised if you end up talking to the same lender that turned you down for a traditional loan only a few months ago. Come prepared with tax returns, business financial statements, bank account information and whatever they request. If you are seeking a larger than normal line of credit, then prepare to offer up some collateral.
3. Secured Vs. Unsecured
Property and inventory are used as collateral for a secured business line of credit. This makes it unattractive for business owners that don’t want to risk their company if things go sour. Unsecured usually doesn’t require this, but it is important to note that it is on a lender-by-lender basis. Even if you qualify for unsecured, a lien or personal guarantee may be required to finalize the contract.
4. Credit Cards Vs. Credit Lines
Your company may also be eligible for a business credit card. It can be used like a regular card, and even includes an option to give actual cash to your bank account. But just like a regular credit card, it comes with fees and a higher APR. A business credit card is also considered a line of credit, and works best for smaller businesses without an established financial core.
5. Things to Avoid
There is a low bar for getting a business line of credit. Companies that are barely scraping by shouldn’t let the allure of loans put them in an even worse position. A business line of credit is a fantastic loan program, but isn’t meant to be a miracle worker for struggling businesses. Before applying for the loan, a plan should already be in place to improve the business.
Stay Ahead of Finances
Getting behind on your finances is an easy way to destroy a business. Stay ahead of money troubles by utilizing a business line of credit. It has saved millions of businesses worldwide, and has a solid history to back up its usefulness.