Lines of credit can be a huge boost to any company. This article lists several methods you can use to increase your business’s chances of obtaining a line of credit.
Keep in mind that, in general, well-established businesses will have an easier time obtaining unsecured lines of credit—meaning they require no collateral—than younger, unestablished businesses.
Step 1: Understand What You’re Getting Into
Before requesting a credit line from a lending organization, you should understand what it is you are requesting. Lines of credit are somewhat different from loans. Essentially, they are a pool of money you can borrow from, rather than a lump sum delivered at the start of the agreement. Typically, they are used for ongoing funding rather than lump-sum purchases. Per Forbes.com, there will be a fee when you set up the line, but interest charges will not begin until you actually use it.
Step 2: Pay Down Other Debt
A line of credit should not be used to fend off other debt. In other words, a business that already has a large amount of debt may scare off lenders, so do your best to pay down outstanding balances before applying for more credit. If you are unable to do that, attempting to borrow money may be the wrong move, anyway.
Step 3: Show Your Business Is Worth It
Businesses looking for lines of credit must have a strong application. Whether your business is new or old, lenders will likely request to see your business plan, so have that ready and updated. Also be prepared to verify your business’s revenue, expenses, and other financial information. Another proactive step is to obtain business’s credit report and have any errors on it corrected.
For more information on obtaining funding for your business, check out Acquisition Capital Solution’s other blog posts or get in touch today.