What Are the Requirements for a Business Line of Credit
Article summary: What experienced business people know is that if you don’t have 100 percent collateral, you will not get approval from a traditional bank. However, in the last 10 years, alternative lenders have been the place to go to for businesses with less than $5 million in revenue. If you do have collateral to back up your line of credit then a bank is the cheaper option. If you do not have collateral then alternative lenders are the way to go.
Why You May Still Be rejected by a Bank even When You Know the Requirements for a Business Line of Credit
- When you go to a bank, they demand 100 percent collateral to cover the cost of the loan. They also expect you to have a strong credit history and a credit score of more than 700. This is something small businesses owners just don’t have usually due to credit and other business debt.
- Banks reject approximately 80 percent of the small and medium business loan applications they receive and most small businesses don’t even both applying. In fact, the number of commercial loans for less than $1 million has dropped significantly over the past 10 years.
- Banks answer more to shareholders than customers. As a result, they are extremely risk adverse. There are also numerous government regulations they must adhere to. As a result, they consider most small businesses too big of a risk for any kind of small business loan.
Some businesses believe that coming close to these requirements will be enough to get a business bank loan. But it isn’t. If you have a good business but simply fall short in meeting the bank’s criteria, you do have other options.
You Have the Requirements for a Business Line of Credit but Where Do You Turn
According to a recent report by the Federal Reserve, a majority of small businesses with less than $10 million in annual revenue are now turning to alternative lenders for fast business financing. Here are just some of the reasons why.
Alternative lenders are fast – in most cases, you can have your money in 48 hours or less. For example, at Financing Solutions (www.financingsolutionsnow.com), it takes only two minutes to complete their online application. Once approved, your business line of credit will be set up.
You don’t have to jump through hoops – simply provide a few supporting documents and you are on your way to quick business financing. This includes your last tax return and income statements. Additionally, you need only a 630 or better credit score and over $300,000 in annual revenue.
They understand small businesses – instead of just rejecting you outright, some alternative lenders will take the time to explain things to you. Financing Solutions will take the time to evaluate your application and your business. They will look at factors such as interest statements and balance sheets, and offer valuable feedback. This is done even if you don’t qualify right now.
Getting a line of credit from an alternative lender is surprisingly easy – if you have ever been to a bank, you will understand the difference. Alternative lenders have streamlined the process so that it moves quickly. A majority of businesses that set up a line of credit renew the line year after year. This is because it is extremely beneficial and they are pleased with the results.