Business Line of Credit Requirements and How To Apply

Posted at March 4, 2020 » By : » Categories : Business Funding »
business line of credit requirements

When you are trying to take your business to the next level, it’s important that you give yourself the tools that will help it grow.

The Small Business Administration (SBA) says that within two years of opening their doors, some 30 percent of companies fail. Plenty of companies with great ideas and promise aren’t able to survive, let alone thrive because they lack the funding needed to take that next step.

Thankfully, you can look into a business line of credit in order to fund your core needs in a flexible manner.

Read on to learn more about business line of credit requirements and other information that will help you apply.

Consider the Business Line of Credit Requirements

Rather than looking into a traditional business loan, you should consider looking into a business line of credit.

There are several requirements you need to know about in order to open up a line of credit for your company. These requirements include prerequisites for getting approved, in addition to understanding the steps for success with your application.

Here’s what you need to know when you want to get a line of credit.

1. Understand How a Line of Credit Works

If you are trying to do what’s best for your company, looking into a line of credit might be just what the doctor ordered. With a line of credit, you can get draw money on a revolving basis.

This is much better than a loan since it is something that you can keep using and re-using when necessary. Your business line of credit works exactly like a credit card.

It can give you plenty of spending power for purchasing anything from equipment to real estate property. Like a credit card, you will be subject to interest rates and need to pay back what you borrow in a timely manner.

2. Determine Your Company’s Needs

When you’re trying to create a foundation for growing your business, determining the most immediate needs for growth will be key.

By starting the process knowing what you need to grow your business, you will know what kind of line of credit you need.

There are several kinds of lines of credit, so figure out whether you need accounts receivables factoring, asset-based financing or other such options.

3. Figure Out the Amount You Need

It’s especially important that you take the time to determine exactly how big a line of credit you need. By coming up with an exact dollar amount, you will know the line of credit amount that will take your company to the next level.

Get specific about what you need, so that you can spend the money wisely. Knowing exactly how much you need and why may also help with your application.

4. Consider the Qualifications for a Line of Credit

One of the most important steps is to make sure you can qualify for a line of credit. Some of the criteria that these companies will look into include how long you have been in business and your company’s assets and liabilities.

They will also want to see a breakdown of your profit margins, and what sort of deposit or guarantee you are able to provide. It’s important that you also consider the different financial ratios that these credit lenders will research when going through your application.

For instance, they will assess your debt to equity ratio, debt service coverage ratio, and more. When you understand these ratios and how they are calculated, you can check on these figures ahead of time and ensure that you can make your application more attractive.

5. Run Your Company’s Credit Rating

In the same way that you as a consumer have a credit score, so too does your business. This score is known as your corporate credit rating, and it is the metric of worthiness that lenders consider. Run a report so that you can see the current credit rating of your business.

If your company is young or if it has unproven credit, you can look into leveraging your personal credit to get your business credit started. When you have better credit, it will allow you to get the best terms available.

6. Find a Quality, Credible Lender

Finding a great company is key amongst the business line of credit requirements. When you have a company that you can put trust in, you’ll know that you’re taken care of.

Do your research into the various companies that provide lines of credit, and make sure that the fee structure and other terms are suitable for your company’s needs.

7. Display Your Experience and Credentials and Put Together a Strong Application

You need to show your company to be a gold standard in your industry, no matter how much credit you are seeking.

When lenders feel like your company will be around for a while, and that you will use this line of credit to help your business grow, they will be confident about your ability to consistently use it and pay it back.

Put together some reports, get references and thoroughly fill out your application to make sure that you are putting your best foot forward.

Apply For a Great Business Line of Credit

These are some of the business line of credit requirements that you’ll need to meet to take your company to the next level. Each lender may have their own additional requirements, too.

Once you have access to this flexible type of lending, you can use it to grow your business and better serve your customers. When you’re ready to look into these options, our company would be glad to assist you.

Reach out to us to learn about the lines of credit that we have to offer, among many other tools for your business.