What do You Need To Qualify for a Business Line of Credit?

What Are Requirements of Business Line of Credit?- The Complete List For 2023

Does your business need a ready boost in working capital? A Line of credit is an invaluable source of funding when the cash flow is inefficient and the expenses are high. Ultimately, it provides a steady backup during occasional slowdowns and occasional business emergencies.

Check the updated business line of credit requirements and how they can upscale your business.

Business Line of Credit Requirements: What do You Need To Qualify?

The business line of credit qualification requirements differs for each lender. However, three main requirements will highly determine, your chances to qualify. These are:
Your credit or FICO score, annual revenue, and the years your business has been in operation.

Today, lending has been simplified because lenders are keener on where your business is heading than your history. Their focus is to provide a solution that opens up many opportunities. Therefore, even with a low credit below the mark, you can still qualify.

See the detailed requirements below.

Credit Score

Most lenders will ask for your personal and business credit score. Additionally, in most cases with lines of credit, you’ll be required to guarantee personal credit. This helps increase the confidence of the lenders that you’ll pay back if your personal assets are at risk.

Expect lenders to go through your business credit score and history. What if your business is still in its early stages and your credit history is weak?

For startups, your personal credit will shoulder your eligibility.

With a FICO score of 700+, your chances of getting approved will be increased. Lower scores may not hinder you from qualifying but your options may be limited or have tight terms with high interest rates.

Time in Business

Another reason small businesses miss out on the line of credit is that most lenders think they’re risky. But if you can prove that your business has made consistent profits in the recent past, some alternative financiers can still approve you for a business line of credit.

Nonetheless, traditional lenders like banks will require you to have a minimum business operation of 2 years. This period is somehow limiting for most potentially successful startups in need of working capital. However, if you work with alternative financiers you can qualify even with as low as three months in business.

What Are Other Business Line of Credit Requirements?

While most alternative financiers do not have a lot of requirements, other than the credit score, time business, and annual revenue. You may be asked for additional factors alongside your financial statements depending on the lender you work with. Most of these factors are considered by banks and other traditional lenders.

Sometimes a lender will ask you to put up collateral. This happens in cases where your credit score is poor, your business revenue is weak or your business is in the young stages. However, even with these factors if your business is in dire need of a line of credit and has the potential to succeed, some lenders will approve you for an unsecured business line of credit.

Below are the additional factors you need to prepare before applying for the business line of credit.

  • Your business financials. These include bank statements, balance sheets, debt to equity ratios, tax returns profits and losses statements, cashflow projections and history, debt schedules, and expense ratios.
  • Business plan
  • Liquidity of available assets
  • Business registration, licenses and other legal documents
  • Total number of all other open credit lines
  • Valued collateral for a secured business line of credit
  • Financial history including liens and bankruptcy
  • The current industry risk level and potential for growth

What are Business Line of Credit Requirements?

Banks are popularly known for constituting the stringiest and numerous business lines of credit requirements. They have long and rigorous qualification processes including higher credit scores, longer time in business, and more annual business revenues than when working with alternative financiers.

Although requirements of the business line of credit vary with the bank you work with, they revolve around:

  • A minimum credit score of 660(other banks will ask for higher scores)
  • At least annual sales of $120K or higher
  • 2 or more years in business

With such requirements, many small businesses struggle to secure a business line of credit from banks as a result only 66% of them succeed. Relatively, banks take longer to approve applications typically taking from several weeks to months which is inconvenient for businesses.

And even if you have all qualifications, bank turnarounds may make it impossible to take advantage of swift opportunities.

So if you have impressive financials, a concrete business plan, and convince the underwriters that you’ll be able to pay, then you may qualify.

How Can I Get Started with a Business Line of Credit?

To speed up your approval process and guaranteed funding it’s the right decision to work with an experienced funding advisor to grow your business. An expert will also help you interpret technical information and ensure you understood every bit of the process.

If you don’t meet bank qualifications, don’t fret, try out an alternative financier and you may still get approved.

Some alternative financiers approve businesses that have been operational for only three months and have $100,000 annual revenue or more.

Even better, you don’t need stunning FICO scores to pre-qualify for the credit. And you can get access to funds in as little as 72 hours.