Are you thinking of applying for a business line of credit? This is a very intelligent move to make and a great way to manage the financial health of your small business. Essentially, a business line of credit is similar to a credit card in that it provides you with access to cash in times of need, and you only pay interest on the amount that you borrow. A maximum sum will be set by the lender which means that you will always have access to this amount anytime you need it, such as bridging the gap during challenging periods (such as COVID-19) or for growth. Here are some when applying for this type of finance:
#1 Improve Your Credit Score
The first step to take is to improve your business and personal credit scores which will help you to get approved and allow you to qualify for higher amounts. This can take time, so you may want to set a goal in the future for applying and then take the following actions to improve your ratings:
– Check your report and correct any mistakes
- Pay bills on time and in full
- Pay-down existing credit accounts
- Avoid opening additional credit accounts
#2 Get Your Paperwork in Order
As you may expect, there will be a fair amount of paperwork that is required to be granted a business line of credit so you will want to get this allin order before starting the application process. This is likely to include:
- Balance sheet
- Bank statements
- Profit/loss statement
- Business and personal tax return
#3 Find the Best Source of Capital
It is difficult to know where to start when applying for a business line of credit and a good solution is to use a company like Biz2Credit who can match you to the best sources of capital centered around your specific needs. This should help you to secure a business line of credit and get the best possible deal – you could even be approved in just 48 hours.
A business line of credit is a smart idea for any business as it will provide you with instant access to funds whenever required. These tips should help you to get approved for a line of credit and secure the best possible deal which could help your business, whether this is during a quiet period or for growth purposes.
#4 Consider Collateral
Most business lines of credit are secured which means that they will have to be backed by some kind of collateral. Generally, if you can offer some form of collateral you will get access to the higher amounts and better rates, so you might want to think about inventory, real estate or equipment.
#5 Consider Revenue & Time in Business
Other important qualifying factors are revenue and time in business. Often, there will be a minimum revenue requirement so you should always ask what this is for applying and most lenders will require that you have been in business for at least one year before approving a line of credit.