How to Get a Business Line of Credit

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Do you want a funding option for your business that lets you borrow what you need when you need it without paying a fortune in interest? A business line of credit may be what you’re looking for. 

What is a Business Line of Credit?

A business line of credit is a commercial loan product that you can use on an as-needed basis to cover working capital or make purchases. 

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How Does a Business Line of Credit Work?

A business line of credit is a loan product that behaves like a credit card. Instead of getting a lump sum of money, you’ll get access to a pool of cash that you can make withdrawals from during what’s referred to as the draw period. 

You can make as many withdrawals as needed, up to the limit, and make interest-only payments on this amount. And as you repay what you borrow, the funds are free for use again. 

When the draw period ends, the remaining principal balance is converted to a loan that’s payable in monthly installments over a set period. But if you repay what’s owed before the draw period ends, you won’t owe the lender any interest. 

How to Get a Business Line of Credit in 4 Steps

Before you start your search for a business line of credit, familiarize yourself with these steps that make the process seamless. 

1. Find Lenders Offering Business Lines of Credit

Business lines are offered by traditional banks, credit unions and online lenders. You can start with your local bank or credit union when scoping out your options. But they may have stringent qualification criteria or only extend loans to established businesses.

If you’re just getting started or have experienced a few rough financial patches, an online lender may be the better option as they’re generally more lenient. 

Another important consideration is the type of business line the lender offers – secured or unsecured. Secured business lines of credit put your assets at risk if you default on the loan. However, you could get an unsecured business line without putting your assets up as collateral.

2. Review Lenders’ Requirements

Each lender has its own set of guidelines. Still, you could qualify for funding if you meet these general criteria

  • Credit score: Most traditional banks prefer a credit score of 680 or higher, but you could qualify with a credit union or online lender if your score is in the mid-500s. 
  • Company history: It’s best if you’ve been in business for at least six months before applying for a business line. However, traditional banks and credit unions prefer to do business with companies that have been established for at least two years. 
  • Annual revenue: If your business earns at least $50,000 annually, an online lender may approve you for a loan. But you’ll likely need $100,000 or $250,000 if you’re applying with a credit union or traditional bank, respectively.

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3. Prepare Documentation Required by Lenders

It’s highly unlikely that you’ll get approved for a business line without providing certain documents to the lender, which could include: 

  • Your company’s Federal Employer Identification Number (FEIN)
  • Your company’s three most recent bank statements
  • Your company’s most recent tax return 
  • Your most recent personal tax return
  • Your company’s schedule of debts
  • Your company’s articles of incorporation (and other legal documents) 
  • Current and projected financial statements
  • Business licenses and registrations 
  • Franchise agreements

Ask your preferred lenders what you’ll need before you apply. 

4. Submit Applications for Business Lines of Credit

Narrow down your list of potential lenders and submit a formal application with your top selection. Be sure to complete the application in its entirety and submit the required documents promptly to prevent an accidental rejection or processing delays. 

How to Get a Business Line of Credit and Save Time in the Process

Don’t spend hours searching for the perfect business line of credit. Instead, apply with Lendio to view several options at once. You’ll complete a 15-minute application, and Lendio will share your information with over 75 lenders in its network to find loan opportunities that could work for you. 

Lendio offers a business line of credit to give your company the financial flexibility it needs. Whether you need to cover payroll, purchase inventory or make a costly repair, the pool of funds is available for your use when you need it. And once you’ve reached the limit and start repaying what you borrow, you’re free to use the funds again during the draw period. 

You could get approved for $1,000 to $500,000 and have the funds in your account in as little as one to two weeks. Even better, Interest rates start at just 8 percent (with a maximum of 24 percent), and you’ll only pay interest on what you borrow. You’ll have between one and two years to repay what you spend. 

Here are the qualification criteria: 

  • Your credit score must be at least 560.
  • You must be in business for at least six months.
  • You must have at least $50,000 in annual revenue.

Get your company the funds it needs and deserves by applying with Lendio today.

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