Many business owners find themselves in need of a loan at some point or another. In fact, approximately 33% of small business owners struggle or fail due to a lack of capital. A business line of credit is an excellent option for initial funding or expanding your company. If you’re looking for a flexible way to spend, here’s our step-by-step guide to applying for a business line of credit.
Step 1: Check Your Business’s Qualifications
The first step in applying for a business line of credit is to check your business’s qualifications. When considering your application, lenders will look at a few things, including your personal credit score, annual revenue, time in business, and collateral.
If you’re unsure where your business stands on these qualifications, don’t worry—we’ve covered you. Here’s a quick overview of each:
- Personal Credit Score: Lenders will pull your personal credit score when considering your application for a business line of credit. If your score is below 650, it may be difficult to qualify for financing.
- Annual Revenue: Lenders will look at your business’s annual revenue when considering your application. If your revenue is below $100,000, this may create a challenge when applying.
- Time in Business: The longer your business has been up and running, the more likely you will qualify for financing. Typically, companies over two years old have a better chance of being approved.
- Collateral: Some lenders may require collateral to approve your application for a business line of credit. This can include real estate, equipment, inventory, etc.
Step 2: Compare Your Business Line of Credit Options
Once you know what qualifications you need to meet to apply for a business line of credit, it’s time to start comparing your options. There are a few things you’ll want to keep in mind when comparing offers, including the interest rate, repayment terms, and fees.
Here are a few questions you can ask yourself when comparing offers:
- What is the interest rate?
- Is there an origination fee?
- Are there any annual or monthly maintenance fees?
- What are the repayment terms?
- How long do I have to repay the loan?
- What is the minimum draw amount?
- What is the maximum draw amount?
- What is the maximum loan amount?
By comparing your options, you can be sure that you’re getting the best possible deal on a business line of credit.
Step 3: Prepare Your Business Line Of Credit Requirements
After you’ve chosen your lender, it’s time to start preparing your required documentation. Depending on the lender, requirements may vary but typically include bank statements, tax returns, financial statements, and identification documents like driver’s licenses or passports. Ensure all required documents are easily accessible so you can quickly submit them when asked.
Step 4: Apply And Make A Decision
Now you should be ready to apply for your business line of credit! The application process typically takes between 24 and 48 hours. If approved, most lenders will give borrowers an initial draw period during which they can access funds as needed up to their limit. After the draw period ends (usually 6 to 12 months), borrowers will begin making fixed monthly payments until the loan is paid in full.
Get fast access to extra capital for your business whenever you need it.
A business line of credit is a great way to get the cash you need when you need it. If you’re looking for a speedy financial solution for your business, Proto Financial can help! Get the money you need when you need it, so you can keep your business running smoothly. We make it easy for you to compare various lenders to find the best possible rate. Applying is no-hassle and takes only takes 15 minutes!
Preparing for a small business loan? Read the guide HERE.