How to Easily Qualify for a Start-up Business Line of Credit?

In the case of new businesses, it is not very difficult to obtain start-up business loans because our economy wants to promote new and small businesses. As a small business owner, you can get your loan approved easily by providing your business’s documents to the lender. Explain to the lender why you require the loan and the purpose behind it. 

If you do not want to spend a lot of time convincing the lender or having to find a cosigner, offer collateral and make your business loan a secured one. They will check your personal credit score before they grant you the loan. So, make sure that you have all your debts cleared on time and that your debt-to-income ratio is minimized. 

In the case of small loans like a line of credit, the collateral offered is usually in the form of shares and other intangible assets. The loans are generally of a lower amount, so heavy collateral is not needed. However, if you prove that you have had a solid financial position in the past six months, there will be no need for collateral security. Read more to know more. 

Which Credit Line Is Right for You?

The two options available to you for your small business loan are a revolving credit line and a non-revolving line of credit. A revolving line of credit is much like having a credit card. You will have a limit set for your withdrawals that cannot be exceeded. However, the best part about this credit line is that you will have to pay interest only on the amount that you have borrowed and not on the entire value of the line of credit. 

In case of a non-revolving line of credit, you will get a lump sum amount all at once. After you are done repaying the entire amount with interest, your loan account will be closed. So, if you are looking for an option for your day-to-day expenses, a non-revolving line of credit may not be the best choice for you. 

How Do You Apply for A Small Business Loan?

You can submit your application either online or offline, whatever is preferable for you. Either way, you will have to show a complete portrait of your business. It would start from your personal and business tax returns, financial statements and bank account statements, registration documents of your start-up, annual revenue, and the previous credit approvals that you might have gained. 

Since your firm would be a start-up without much history, it would be beneficial if your entire credit history was a clean slate. Make sure to add all the timely payments you have made to vendors and suppliers, your bad debts, and the outstanding accounts receivable to your balance sheet. The purpose of displaying clean financial records would be to gain the confidence of the lender. 

Since this would be one of your first business loans, it is essential that you choose the right time frame along with other terms and conditions. This can also help your loan get approved before time. However, it will be difficult for you to get your loan sanctioned if you have not been in business for at least six months. Additionally, you will also have to show documents to prove your steady cash flow and discuss your long-term prospects with them. If the lender is satisfied with all of the details that you provide, you will get your business loan approved. 

Steps In Applying for A Line of Credit

1. Decide On the Amount

The first and foremost step towards planning to get a line of credit is to decide on the amount of funding that your business would require. While deciding this, it is essential to keep in mind that your business is a start-up and will get credit up to a certain amount only. There is also an option to ask for additional credit if the amount is not sufficient for your business.  

2. Check Your Eligibility

Take a look at the eligibility criteria for start-up business loans. In most cases, a good financial history and credit score are sufficient. However, some lenders require you to be in business for a minimum period of time. 

3. Research The Lenders

Learn about the different lender options available to you. Check the interest rate they all offer and the maximum amount of credit you will get before choosing one. 

4. Gather Your Documents and Apply

Talk to your lender about all the required documents. Gather them, and then finally apply for your business loan. 

Getting your business, a loan without having much financial history is a difficult task, but it is not impossible. Get yours today without thinking twice.