Qualifying for a business line of credit may be a bit complicated but there are easy ways to get past the meticulous eyes of lending companies. As financial institutions are capable of providing small this type of line of credit, each has to meet the requirements to become eligible for loans. Below is a short discussion regarding business line of credit requirements and the advantages that come with this type of loan.
A business line of credit or LOC lets a borrower obtain a pre-set credit limit and draw it as required. Not getting the entire loanable amount in one withdrawal makes one to pay only for the interest incurred by the partial amount—a welcome idea for most borrowers.
Borrowing firms may easily cover up cash shortages and benefit from time sensitive projects like purchase of product inventory, office supplies, or equipment.
This can be paid up in a short time with an interest to its principal or most likely, fast payers may avail of full repayment without interest charges.
Requirements from lending establishments
You may qualify for a business line of credit if you have a long standing relationship with a bank. Meaning, you have an existing bank account. Not only that—your account must have maintained a good standing. If you have a history of issuing bouncing checks or have overdrawn from your account, forget that you wished to apply in the first place.
Banks and other lending entities would want to see that you have enough money that stays on your account to pay off some loans or debts.
Half of new businesses are most likely to fail within five years of from startup operation that is why they are required to have at least two years in the business to qualify for an LOC. This is smart move by financial institutions reduces the risk of being scammed by unscrupulous establishments.
As proof of a borrowing company’s financial history, lenders require submission of financial statements, income tax returns, or other banking records to supplement other information presented by them.
Major credit bureaus keep track of credit reports owned by borrowing organizations. While other borrowers pass this test, some may not. This is because of low ratings where credit history is concerned. Credit scores improve once payments are on time but reduce its value once loans are paid late or the borrower has defaulted.
For you to pass this level, you have to earn at least 75 from a scale of 0 – 100. However, some lenders may require collaterals like large equipment or real estate in order to qualify you for a loan if you fail to come up with the required credit report.
Difference between Banks and Online Credit Lenders
Banks and online LOCs differ in some ways. A bank may have strict rules and a higher credit rating plus bank deposits while online lenders may qualify you even if you are not so eligible on these departments. Nevertheless, online lenders may charge you with higher interests compared to that of a particular bank’s business line of credit requirements.
Business Line of Credit Hub does the heavy lifting for you when it comes to details of Business Line of Credit Requirements. We give you a clear picture of what lenders offer you and what line of credit is best for your business.