Get A Business Line Of Credit
August 6, 2019
Getting a traditional bank loan for a small business is extremely difficult, and one of the top barriers to approval is often the business owner’s credit score. Due to the nature of bank lending, bankers typically will not lend to a new business owner who has a credit score under 720.
What most people don’t know is that there is a way to establish credit for your company while also receiving much-needed funding. Lines of credit can give you a new way to build a business credit score, all while giving you as much (or as little) money as you need. Leo Capital Group can help you obtain them.
WHAT IS A LINE OF CREDIT?
Businesses and people are both able to have their own credit cards. A business line of credit, simply put, is a credit card (or credit account) that is dedicated to your company rather than your individual self. It can be used wherever credit cards are allowed and holds a much higher limit than what a typical personal account would be capable of handling.
Most business lines of credit start around $100,000 and can easily exceed $1 million depending on a variety of factors.
HOW DO LINES OF CREDIT WORK?
In a lot of ways, a business line of credit is very similar to the way a credit card works. You can borrow up to the amount set as your credit limit. Much like a credit card, you only have to pay interest on the amount you borrow. You don’t have to borrow all the money at once.
The credit line is a revolving debt, which means that there’s no real amortization. It also acts as a basic building block of business credit—a credit score that is completely separate from personal credit. As long as you pay the minimum balance on time, you will be able to build credit for your company regardless of your personal credit issues.
WHAT ARE THE BIGGEST BENEFITS OF BUSINESS CREDIT LINES?
Being able to spend exactly how much you want, and not a penny more.Many business owners feel cornered by loan and cash advance minimums. A line of credit allows you to borrow exactly what you need in order to make ends meet, rather than deal with more debt than you need.
Not having to regularly apply for loans and advances.A revolving line of credit means that you will be able to enjoy the comfort of being able to make ends meet without having to rely on advances. This cuts down on paperwork and also makes life simpler.
Being able to build business credit.Business credit is the magic key to being able to get approved for a business loan. Within one to two years of responsible credit use, many business owners find themselves able to acquire better funding than ever before.
Not having to rely on personal funding.It’s shocking to hear how many entrepreneurs put business items on their own credit line. With a business line of credit, you will be able to separate your funds permanently.
HOW DO I QUALIFY FOR A LINE OF CREDIT?
If this is your first business line of credit application, don’t panic. Everyone has to start from somewhere. The minimum guidelines for lines of credit are far more flexible than traditional loans, and the majority of companies that apply get approved.
Most businesses that get approved have these statistics in place:
They are in business a minimum of one year.In most cases, a year is a bare minimum for businesses to get a line of credit. Though rare, companies as young as three months have been approved.
The primary business owner has a credit score of at least 600.Depending on cash flow, you may be able to get approved with an even lower score.
The company’s annual income is at least $50,000.Some lines of credit may ask for a higher revenue, though it’s rare.
Generally speaking, lines of credit cannot be given to businesses in “vice” industries such as firearms sales, alcohol sales, or adult content.
HOW MUCH DO LINES OF CREDIT CHARGE IN INTEREST?
Due to the extremely wide range of credit lines available, this isn’t really an easy question to answer. The interest rates will vary greatly depending on how much of your credit you use, your business credit score, your choice to pay early, as well as a large variety of other factors.
Credit lines can charge as little as 9 percent APR, or have interest rates as high as 79 percent. Both the high and low end of APRs are exceedingly rare; most credit lines will charge a rate that’s somewhere in the middle.
WANT TO LEARN MORE?
If you are new to business funding, getting a line of credit might be one of the best options out there. At Leo Capital Group, we offer a spectacular array of credit lines that suit your company’s needs and are ready to help pair you with the right one for you. Call us today to find out more!