Small business lines of credit work very much like a personal credit card does, in that your small business will have a credit limit which it cannot exceed, and you only pay interest on the portion of credit which is actually in use at any given time. By making regular payments on the credit in use, you can add to the balance available for future credit needs.
A business line of credit can be extremely useful for small businesses, because it can help to cover shortages with cash flow, and it can pay for inventory and operating expenses when necessary. Best of all, it doesn’t involve the long, drawn-out process of having to apply for a bank loan to acquire the needed funding – the money is always there when you need it, as long as you don’t exceed your credit limit.
How you can qualify
Small business lines of credit are available both from traditional lenders like banks, and from alternative lenders which have sprung up to fill the gap created by very restrictive loan approvals from traditional lenders. If you are applying for a business line of credit from a bank, you can expect to be required to demonstrate several years of credit history, and to have a strong revenue stream associated with your business.
You’ll also need to supply personal tax returns, business tax returns, financial statements from your company, bank account information, and a fairly strong business credit score. As a general rule, the qualification criteria will be looser when you’re applying with alternative lenders, although you may have to pay a higher interest rate, and you may not get as high a credit limit as you might from a traditional lender.
Small business lines of credit with Capital Financing Solutions
Small business lines of credit can be very helpful for companies needing to cover gaps in cash flow, or to make necessary purchases of inventory or raw materials when needed. Contact us at Capital Financing Solutions to discuss how we may be able to work with your company to setup a business line of credit.