A business line of credit is like an unsecured credit card businesses get from banks; they have a spending limit, which the bank decides, and they can spend up to that limit per month. The funds accumulate interest until paid off. Businesses often use lines of credit for short term funding. The requirements for a business line of credit are different from lender to lender. In general, most lenders require having been in business for at least 6 months, at least $25,000 in annual revenue, and a credit score of around 500. However, some traditional lenders may have steeper requirements. To get a business line of credit, you must first compare your options and check their requirements. Once you find one you qualify for, you must gather certain financial documents, such as bank statements, financial statements, and some legal documents. Once you have your documentation and a willing lender, you can apply. A no doc business line of credit is like a line of credit offered by banks but it requires less paperwork. These lines of credit are offered by alternative lenders that operate differently from traditional banks. These lenders also tend to offer a number of other short-term financing solutions for small businesses. A stated income business line of credit is a revolving credit line for which there is no income check requirement. These lines of credit offer businesses with limited income history an opportunity to receive businesses financing. These lines of credit often come with higher interest rates and a collateral requirement.Business Line of Credit Requirements
How to Get a Business Line of Credit
No Doc Business Line of Credit
Stated Income Business Line of Credit
Business Line of Credit FAQs
A business line of credit (LOC) is a type of financing that provides companies with flexible access to funds as needed, up to an approved amount. It acts like in-house revolving credit and allows businesses to borrow money when they need it and repay the loan over time, rather than all at once with a lump sum loan.
A business line of credit can be used for many purposes including working capital, inventory purchases, utility bills, seasonal gaps in cash flow, paying staff salaries, or for other costs related to running your business such as marketing expenses or equipment purchases.
Yes. To be eligible, most lenders will require your business to be in operation for at least one year and have an annual revenue of $50,000 or more. Your personal credit score is also taken into consideration when applying for a business LOC.
The amount that you are able to borrow depends on the lender and the type of line of credit you apply for. Generally, loan amounts range from $10,000 to $500,000 depending on your qualifications and industry sector.
Most business lines of credit require monthly payments based on the outstanding balance. Interest rates vary, but are usually lower than those of a business loan. Additionally, you may be responsible for additional fees such as origination and closing costs. All repayment terms will be outlined in the credit agreement when your line of credit is approved. It’s important to review all terms carefully before signing a contract or agreeing to any commitments with a lender.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.
