Are you seeking a flexible type of financing for your business? If you are, then a line of credit (LOC) may be the solution you need. A business credit line works like a credit card. The lender allows you to draw on the line up to a limit. You may either make just a single draw or many smaller draws provided that you do not go beyond your credit limit.
With a revolving credit line, a business borrower has greater access to funds. These funds will replenish when they pay down the balance, which gives them access to money time and again.
Besides the flexibility of a line of credit, entrepreneurs and business owners often get fast funding. Some lending companies approve credit lines in a matter of minutes, providing borrowers with instant access to funds they need. Read on for more info you need to know before applying for a business line of credit loan at organizations like Fundygo.
What Do You Need to Qualify for One?
The repayment terms of business lines of credit are shorter than several other forms of financing, so borrowing requirements are usually more lenient. This varies from lender to lender, though. Traditional lenders such as banks usually offer better terms and lower interest rates, but they have more requirements, which include a solid credit score. Some non-bank lenders may not consider your personal or business credit history and focus on your business’s performance, but they may have more fees, higher rates, and less favorable loan terms.
To be eligible for this kind of loan, you must have been in business for three months at the least. However, some lending companies may stipulate a relatively longer time-in-business requirement. You will also have to show revenue proof to qualify for it. Your business has to have $50,000 at the least in annual revenue. Then again, the lender you choose may require you to have higher minimum business revenue.
Even when you meet the lender’s minimum requirements, it is important to keep in mind that this does not guarantee that you will be given a credit line. Another important qualifying factor is business performance. Do not expect to get the maximum borrowing funds if your business’s revenue is low and you have been in business for a short time.
Some lenders may also consider a business borrower’s personal credit profile. They may use it to decide your fees, maximum borrowing amount, and rates. This varies among lenders, so make sure that you meet credit qualifications before applying for this form of financing.