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How to Get a Business Line of Credit as a New Business

  • January 28, 2021
  • Written by : Carl Eschenburg

New small business owners, like yourself, want to feel prepared when it comes to starting a business. Financially, that means having proper funding to allocate to all needs, and not having to fear costs.

To have this sense of security, businesses look to a line of credit. With this, owners feel more equipped and less stressed when it comes to big costs such as those for equipment, payroll, or marketing costs.

Let’s take a look at what exactly a business line of credit is, how to get one, and what the benefits are:

Business Line of Credit

A business line of credit offers capital on a revolving basis; in simple terms, a business can draw capital as needed and repay funds in said time.

Your small business has the flexibility of using funds as often as necessary, so long as you make payments on time and do not exceed your credit limit.

Small businesses use a line of credit to help even out cash flow and is typically used for inventory purchases, project costs, or employee payroll, as seen by our specialists.

How to Get a Business Line of Credit

The first step in any loan process is to find and secure a sufficient lender for your best business line of credit. For this, we suggest looking for someone with experience, someone you can trust, and someone who will be transparent throughout your funding phase.

Get ready to speak with multiple lenders about their personal qualifications and present a well through-out financial plan to increase your chances of approval.

The next step is to prepare for your application. While our application takes just three minutes, you will need several documents ahead of time to make sure this process goes smoothly (see our FAQ below for more).

To apply for a business line of credit, you only need a few things; you may feel surprising in nature at the detail in the paperwork required to obtain a loan…

The reason being, according to our experts, is that the US Small Business Administration reported that only 20% of small businesses survive the first operational year; that is why both banks and finance companies ask for at least 3 months of financial statements to analyze business health and revenue proof.

Lastly, upon receiving an approval, a line of credit providers typically ask for bank verification for fraud prevention, a driver’s license to confirm identity, and a utility bill to confirm the address of the business.

Benefits of Getting a Line of Credit

Our experts are not biased, but we sure do know of some outstanding benefits from getting a business line of credit for your small business.

Flexibility

Instead of offering a one-time lump sum that would be required to be repaid in a series of payments, business owners now have the flexibility of drawing cash. Imagine having working capital to support you in any occasion, good or bad, expected or not. It’s not realistic for a small business just starting out to not feel stressed when expenses pile up or when one big costs comes out of the blue.

Low-Interest Rate Paid Only on Credit You Use

As mentioned below in our FAQ, the interest charged on a business line of credit starts at 0.4% per week; with 6 to 12 months to repay the funds and low-interest rates, businesses never have to worry about ballooning costs on their line of credit.

Fast Processing

Applying through our online application, you can get your credit line approved in one day. With instant approvals, you can apply and receive funding within the same 24 hours.

How a Business Line of Credit Works

With a small business line of credit, you can borrow up to a certain limit and pay interest only on the portion of capital that was borrowed, hence the hype around flexibility as this loan’s biggest benefit.

As long as you make your payments on time and don’t exceed your credit limit, you can keep using those funds as much or as little as you want.

There is no need to continuously reapply for funding. Once approved, you can consistently use and reuse available funds to your liking. You will never have to commit to fixed monthly payments. Yet you will always have the freedom of setting up comfortable payment plans (if you choose) allowing you to repay your balance earlier to save on interest costs.

FAQ for Business Line of Credit:

How long will it take to get funding for a business line of credit after approval?

About one day.

What do I need to apply for a line of credit?

A small business seeking a line of credit will need to provide proper documentation:

  • Application
  • 3 months of business bank statements
  • Bank login
  • Utility bill

In addition to this, a business will need to meet the qualifications requested by the lender. With us at REIL Capital, we ask for:

  • 6+ months in business
  • $100,000 in revenue
  • 600+ FICO

How can I qualify for a line of credit?

As we mentioned in the question above. Almost all small businesses are able to obtain funding so long as the business has been operating for more than 6 months with revenue.

Less established and younger businesses typically qualify for shorter-term credit lines. Whereas, businesses with a strong financial and credit history qualify for medium-term credit lines, according to our experts.

How much can I expect to gain through a business line of credit?

Our specialists explain to businesses that the maximum funds allowed to a business are determined through multiple variables. For example revenue, credit score, and payments history, and therefore vary between companies.

What are the interest rates applicable with a business line of credit?

With us at REIL Capital, we offer our clients fair and honest rates; a business owner can expect a rate beginning at .4% per week.

Did you get an answer for all your questions? If not, please reach out to our experts to find out more about a business line of credit.

We’re here to help your business succeed, starting from the ground up.

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