When it comes to getting money for your small business, your first thought is likely to start looking at standard loans. While small business loans are certainly the most common way to finance your company and pay for the improvements that will drive your growth, they’re not the only option you have. Business lines of credit allow you to borrow what you need when you need it without placing any restrictions on how you can use the money. Here’s what you need to know to get a good line of credit from your preferred bank or lender.
Get Your Documents in Order
Applying for a business credit line is a lot like applying for a standard loan. You still need to show banks what your company’s finances are like. This means you’ll need to compile profit and loss statements, bank statements, estimated profits for future months and your proof of stable cash flow before you can qualify. Speak with your accountant as soon as possible and start gathering those documents before you apply. If the banks ask for additional documentation before they can process your application, they’ll let you know when you apply.
Work With a Lender You Trust
You’ll likely be able to get a business line of credit from the bank that you use for your business’s checking account. However, that doesn’t mean you can only apply for one with them. Use this to your advantage and get quotes for credit lines from several banks. Compare the amount they’ll give you, the interest rates they charge and any additional fees they’ll assess for the service. Choose the lender that offers you the best terms on the credit line.
Be Prepared to Offer Collateral
All banks need proof that you’ll be able to repay the money you use in full. If your company is established and has a proven profit history, this should be enough to win them over. However, if you’re new to business, banks may ask you to provide collateral to guarantee the credit line. Be prepared and find out what types of collateral each bank will accept before you agree to the credit line. Remember to choose something that your business can survive without. This way, your company won’t suffer if you can’t repay the line of credit in full.
Lines of credit are a great alternative to small business loans. Follow these steps and you’ll be able to get a great credit line in no time.