What You Need for Business Lines of Credit
Every business owner understands the importance of accessing quick cash to handle expenses and other unexpected expenses that arise. Also, access to fast money allows you to deal with the challenges of operating a business. The problem comes when you don’t have enough working capital to handle all business expenses. That’s why business owners opt for lines of credit to get the money they require. A line of credit can be of significant help if you have seasonal revenue or your venture is proliferating, and you require cash to pay expenses. Besides, they are affordable. But, getting a line of credit can be a daunting task. That’s why you need to prepare adequately before applying for a business line of credit.
Time in Business
Lenders analyze your business before offering a business line of credit. They often prioritize companies that have been operational for two years. A long time in operation shows the lender that your business has some experience and longevity. But, you can also access a line of credit when starting a new business as long as you have a favorable credit or solid collateral.
Most lenders of business lines of credit will ask for your credit reports to determine whether or not you qualify for the loan. While you may not necessarily require your credit report, it’s wise to carry it. It helps to know your credit score and the obstacles it might create when applying for a line of credit. Some lenders, such as credit unions and banks, might ask for your business credit report.
Revenues and Profits
Your business must have revenues for it to qualify for a line of credit. The company must also be profitable. Lenders view your company revenues as their principal means of repayment. As such, your company’s profits and revenues must justify the size of the line of credit you want to get. Unprofitable businesses and those without incomes are not likely to get a line of credit unless the owners can give collateral that acts as a guarantee.
Articles of Incorporation
You may have to present the Articles of Association when applying for lines of credit. Lenders want to see proof of business ownership, such as licenses. Some lenders even ask for signatures of all the business owners before giving you a line of credit.
A line of credit is an excellent way of filling revenue gaps and covering unforeseen expenses. Make sure you find the best rates and conditions for a line of credit. Don’t forget to look out for hidden costs and other fees.