How Do I Qualify For A Business Line Of Credit?
The application and qualification process for a business line of credit can be time-consuming and overly demanding, but it’s flexible and straightforward through alternative financing.
Different lenders have various eligibility qualifications, so the qualification hugely depends on where you apply. The advantage of applying for a business line of credit through alternative financing is that your collateral plays a huge role.
Traditional banks and credit unions have strict, tedious, and aggressive qualifications. Typically, they need a business with spotless financial records, at least a one year of business history, and stable annual revenue. If your business doesn’t meet these requirements, you can hardly qualify for the funds.
However, even if your application has been rejected at a bank, you can still pre-qualify for the funds from alternative financers based on the value of your collateral.
Alternative financiers like FV Vantage are less demanding and more focused on your opportunities for business scale-up over other factors like business credit and history. To qualify for a business line of credit at FV Vantage, you only need the following:
- 3 months in business
- $ 10,000 annual revenue
- 580+ credit score
What Is A Business Line Of Credit?
A business line of credit enables business owners to acquire funds anytime they need it and is a highly flexible financing option for most businesses. This option of funding enables you to withdraw any amount of cash from your business credit limit depending on your business needs. And you only pay the interest of the amount you used.
Unlike selling equity, this business financing gives you the freedom to own and maintain your business activities without tempering with your profits. The business line of credit is the ideal and flexible financing option when your business is in the expansion phase, and you need quick access to funds.
Additionally, a business line of credit is handy if you want to bridge cash flow gaps in your business during the slow seasons. There are no restrictions to direct how you use the funds, so you can take the earliest chance to any business costs or emerging opportunities.
Let’s say, a client is due to pay you in weeks, but there is an essential equipment on a discount that you can purchase, then you can quickly apply for a business line of credit, secure funds in a day and buy the equipment before your competitors.
How Does A Business Line Of Credit Work?
Business lines of credit work similarly to credit cards however they slightly differ in structure which is streamlined to suit business owners better. Business line of credits are also significant for tax purposes because you can use a credit line to reduce the interest rate.
After you apply and qualify for a business line of credit, you’re immediately given a maximum credit limit. And from that limit, you can draw any amount of cash you want depending on your business needs at hand. You can also withdraw in bits or installments if you don’t want to draw a lamp sum. Additionally, you’re not obligated to use the total limit if you don’t need to.
Your cash limit revolves as you continue to pay it down, so you access funds continuously. The good thing with business lines of credit is that you don’t have to pay interest on the whole credit limit, but instead you only pay the interest of the funds you use. Some lenders will want you to pay a non-utilization fee. These are maintenance funds you pay when you don’t use your LOC for a certain period
For example, let’s assume you qualify for a $ 200,000 line of credit. Then you acquire the total amount, $ 200,000, and use some of that money to grow your business. And it generates revenue of $ 100,000, which you use to pay down your credit. Meaning, your account balance will have balance and credit limit at $ 100,000. With $100,000 paid, so you’ll have access to an additional $ 100,000. There’s no payment deadline. All you need to do is keep your credit line active.
Why Work With Us?
We offer a better way to finance your business as it expands. You get the some of the best line of credit the market has to offer and other business loan options right at your fingertips, thanks to our streamlined application process.
- Find it, File it, Fund it
- Get approved as quickly as within 24 hrs
- Get fund in as early as 3 days
- Get lines of credit up to $20,000,000
Frequently Asked Questions for Business Lines Of Credit
Q. Can I use a business line of credit for anything?
A. The main purpose of lines of credit is to be flexible and custom-tailored financing options to your business needs. You can use the funds to balance expenses that slow your business progress or grow using pop-up opportunities. There are no limitations on how you should spend the funds.
Among the most popular ways businesses utilize business lines of credit include,
- Operating costs
- Inventory or supplies
- Seasonal slow periods
Q. What are the advantages of a Business Line of Credit?
A. A business line of credit is a powerful tool for your business growth. Unlike other financing options from banks and credit unions which have strict requirements, business LOC are flexible, fast and convenient way to access finances whenever you need them, and beat your competitors and any arising challenge in your line of business. Also, it helps you grow your business credit card score.