Getting Approved for Business Lines of Credit

Getting a line of credit can be the easiest way to handle short-term cash flow issues, especially if your business only needs to cover the cost for a week or two. That is because they often come with awesome perks like short grace periods before any interest is assessed. They are also versatile, allowing you to draw cash from them as needed, up to the maximum balance. With active maintenance, business lines of credit can make sure you never come up short when you are in between customer payments, for as long as your business is profitable. So, how do you get approved?

1. Use Collateral to Keep Costs Down

If you want access to a serious amount of working capital at a minimal cost, you need to use an asset to secure the credit line. The most common choice is real estate because it tends to appreciate or at least retain value over time, so for a reusable credit line that is optimal. The value of your collateral also determines the maximum value of your credit line, so using a property has advantages over a vehicle in that regard as well. Lenders also offer much lower lines at higher interest rates if you ask for an unsecured credit line, even if your credit is good.

2. Document Your Income

Clear documentation of your income is also necessary for a good credit line offer. The asset makes sure the lender can recover the cost of the debt, if necessary, but your income is what demonstrates your ability to maintain the line in good standing. Since these relationships can last much longer than those between lender and borrower for discrete loans, updating your income can also help you get credit line increases and interest rate reductions as your business grows.

3. Optimize Your Credit Rating

It is not always possible to turn a whole credit rating around in a hurry, but you can eliminate any short-term issues that could raise red flags. Take care of outstanding missed payments if there are any, and if your business does not have its own credit score yet, make sure you check out your personal score. Many lenders will use a company owner’s credit score if the business is new enough to not have established credit. Once you have all three pieces of the puzzle, it should be as simple as filling out an application and receiving an offer. When you’re prepared, the question is not whether you get approved, it’s how big a line you get offered.