Steps to Get a Business Line of Credit

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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Many businesses use traditional loans and credit cards to smooth out cash flow and keep operations afloat. In some instances, the extra capital is also used to capitalize on business opportunities that foster growth. But these aren’t the only two ways to inject capital into your business. A business line of credit is another viable option that can provide cash on an as-needed basis. 

Find The Best Loan For Your Small Business

Get funding in as little as 24 hours. See your prequalified offers by filling out a quick online form. No industry excluded. SBA financing is available.

What Is A Business Line Of Credit and How Does It Work?

A business line of credit is a form of financing that works like a credit card. Upon approval, you’ll get access to a revolving line of credit that can be used as needed, up to the credit limit. 

Each time you make a payment, the funds become available for withdrawal (except for any amount you pay towards interest). And unlike small business loans, you’ll only pay interest on the amount you draw. 

How Long To Get Approved for a Business Line of Credit?

It depends on the lender. Some approve applications within one or two business days. Others take several days or months to reach a lending decision. Online lenders generally have faster application processing times than traditional banks and credit unions. 

How to Get a Business Line of Credit Step by Step

1. Decide How Much Funding You Need

How will you use the funds? Do you know how much funding you’ll need? It’s essential to answer these two pertinent questions to understand how big of a business line of credit to apply for. 

2. Check Your Eligibility

Lenders typically have their own set of guidelines. However, most will evaluate the following: 

  • Credit history: Is your personal credit score up to par? You will need a credit score of around 600 or higher to qualify for a business line of credit. Be mindful that applicants with lower credit scores typically get higher interest rates or are required to put up collateral to lessen the risk of default. 
  • Business revenue: Does your company earn enough to repay any funds drawn from the business line of credit? If your revenue is relatively high and you have good or excellent credit, you’ll typically get access to a generous business line of credit with favorable terms. 
  • Time in business: How long has your company been in business? In most instances, you’ll need at least a year in business to qualify for a business line of credit. Some online lenders will approve you even if it’s been less than a year.

3. Research and Compare Lenders

Before you begin researching lenders, it’s best to understand the differences between short-term and long-term business lines of credit: 

  • Short-term line of credit: offers a repayment period of up to one year and usually has less stringent qualification criteria, a streamlined application and faster funding times 
  • Long-term line of credit: offers an extended repayment period with a lower interest rate

Next, you can commence your search for lenders who offer business lines of credit. They’re available through banks, credit unions, online lenders and the Small Business Administration (SBA). 

Find The Best Loan For Your Small Business

Get funding in as little as 24 hours. See your prequalified offers by filling out a quick online form. No industry excluded. SBA financing is available.

4. Check Costs and Fees

Once you narrow down your list of lenders, evaluate the fees they charge. Common costs and fees include: 

  • Origination Fee/Application Fees: a fee that’s assessed to process your application for a business line of credit 
  • Service or Processing Fees: a fee you pay the lender to maintain your business line of credit and keep it active
  • Prepayment Fees: a fee the lender charges if you pay the amount you draw off early 
  • Late Payment Fees: a fee you’ll pay if you remit payment after the due date
  • Closing Costs: costs you’ll pay to finalize the business line of credit before funding
  • Draw Fees: a fee you pay each time you make a withdrawal from your business line of credit 
  • Insufficient Fund Costs: a fee the lender assesses if your bank rejects a loan payment because you have insufficient funds in your account to cover it

Remember that fee schedules vary by lender – some lenders charge certain fees that others don’t. 

5. Prepare Application Documents

Before you formally apply for a business line of credit with your top lender, gather these documents to help the process go smoothly: 

  • Personal and Business Tax Returns for the past three years 
  • Business Licenses
  • Articles Of Incorporation
  • Personal and Business Bank Statements for the past year (note: many online lenders only require statements from the past three months) 
  • Profit and Loss Statements
  • Financial Statements
  • Business Plan
  • Building Lease

6. Submit Your Application

Finally, the most important step is to submit a formal application. When completing the form, confirm that all the entries are entered correctly. Otherwise, you risk having your application denied or experiencing processing delays. Beyond the supplemental documents listed above, the lender will also request this information: 

  • Your Name
  • Business Name
  • Social Security Number (SSN)
  • Desired Loan Amount
  • Loan Purpose
  • Business Tax ID
  • Annual Revenue

Where to Get a Business Line of Credit

You can spend hours searching for the perfect lender, or you can turn to Biz2Credit to lend a helping hand. 

Here’s how it works: 

  • Submit a free, no-obligation application by answering a few simple questions in just four minutes. 
  • Receive a lending decision in as little as 24 hours. 
  • Get access to the funds needed for your business in as fast as 72 hours.

Simple as that. Even better, financing between $25,000 and $6 million is available through working capital, term loans or commercial real estate loans. Enquire today to determine how much funding you may qualify for.

Biz2Credit

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