Why It’s So Hard To Get A TD Bank Business Line of Credit
You might be thinking about getting a TD Bank Business Line Of Credit in place. After building 7 companies over 25+ years and having to deal with a lot of banks, I have learned one thing. Knowing what a bank will look for in their approval process will save you a lot of time. Moreover, it will increase your chances of approval. I am happy to share with you those experiences and also talk about other financing alternatives to consider.
Summary of Article:
- What will the TD Bank Business Line Of Credit process be like
- Collateral, business/personal credit score, and personal guarantees
- Why Financing Solutions Business Line of Credit might be a better alternative
- Other areas TD Bank will be looking at
- TD Bank’s SBA loan program
What will the TD Bank Business Line Of Credit process be like
A business line of credit is a predetermined amount of money that your business will have access to that you can draw upon on request.
Your application for a TD Bank Business Line Of Credit will begin with you filling out a lengthy application. First, the loan application will be asking you a lot of questions related to both your business and personal assets. Expect it to take you, or someone who works for you, a week or two to complete the application. You will find the process tedious. The more information you provide; the better chance you have to be approved.
Then, once you submit your application, the bank will ask for a lot of backup documentation. They will want to see business and personal tax returns, business accounting reports, business agreements, and personal financial documentation.
Don’t expect the bank loan officer to be willing to provide you with much insight into if you will be approved without you filling out the application.
If you are approved, it will take at least 30-60 days at minimum. The bank will then come back with additional requests. It will then take another 30-60 days after this to get the line in place. The whole process will be 3-6 months to have your LOC in place.
The business line of credit will be renewed yearly provided you submit the same updated documentation showing that your business hasn’t changed. The renewal isn’t an easy process either and the bank lending criteria will change based on the economy and your business results.
Collateral, business/personal credit score, and personal guarantees
Local and large banks that provide business loans, like TD Bank, will all be looking at 3 main criteria to approve your application.
All banks require business and personal collateral to back up your business line of credit. This is called a secured line of credit.
Collateral are assets that can be resold to pay off the bank debt incurred in cases of default. Owned equipment, inventory, a portion of your accounts receivable are all examples of collateral. In the case of personal assets, examples would be stocks, bonds, cash, equity in your home, etc.
TD Bank and other banks will approve you for a secured business line of credit if you have collateral to back up the line.
Some banks might provide a small unsecured line of credit but you will have to have an excellent credit score and a strong proven cash history with the bank.
Business/personal credit score
All banks are going to run a business and personal credit report to determine if you meet their minimum requirements and if there are any significant issues.
The bank will pull a business credit report from companies like Dun and Bradstreet which will show outstanding business debt, time to pay invoices, any court cases, and any other unfavorable issues.
Most banks are also going to require a 700 or better credit score unless you have significant collateral to back up the business line of credit. Banks will not consider credit scores of 650 or lower for a business line of credit or business loan.
Banks will more than likely pull your credit report from Transunion, Experian or/and Equifax. If you are unsure as to your own credit score you can get a free credit report from Credit Karma which I have used for years.
Unless your business is over $10 million in yearly sales the bank will require you to have a personal guarantee (PG) on the credit line. Cosigner(s) on your home are also required to personally guarantee the credit line.
Why Financing Solutions Business Line of Credit might be a better alternative
Financing Solutions provides unsecured business lines of credit up to $100,000 to small businesses. You must be doing at least $400,000 per year in yearly revenue.
The government does not fund Financing Solutions, a direct financing company. As such, it has much easier approval standards than banks. Financing Solutions was founded on the premise that there are a lot of good small businesses that can easily have a line of credit and be able to pay it back.
Below are some highlights that will allow you to compare Financing Solutions to a commercial bank.
Highlights of a Financing Solutions Business Line of Credit:
- Requires no collateral or personal guarantees
- Costs nothing to get in place and nothing when not being used
- Can be paid off at any time making it inexpensive
- No obligation 2-minute online application
- Credit Line set up in 48-72 hours
- Online secure customer portal
- A+ and 5-star rated by the BBB
- We approved 90% of applications with co. over $400,000 in yearly revenue
- People to talk to who understand small businesses
- Great cash back up plan for emergencies
Other areas TD Bank will be looking at
There are many other areas of your business and personal assets that banks will be looking at to approve your line of credit.
Uniform Commercial Code (UCC)
Banks will be pulling a UCC on your company. The Uniform Commercial Code (UCC) is a set of laws that provide legal rules and regulations governing commercial or business dealings and transactions.
The bank looks at liens against your assets. Many companies might have a UCC filed on your business without you realizing.
The bank is going to want to be in the first position so that means companies/banks/lenders UCC’s will have to be cleaned up. Many of the UCC’s will be old and no longer valid but this will take some time.
Banks are going to charge an application fee and a yearly maintenance fee. Since Financing Solutions does not charge these fees it could mean that a TD Bank Business Line of Credit could cost you more overall than a FS credit line depending on how much you intend to use your line.
Financing Solutions line will not impact you applying to TD Bank so it might be a good idea to get the FS line of credit in place while you are applying elsewhere.
Reviewed or Audited Financials
TD Bank may require reviewed or audited financials from an accountant.This is different than the normal tax preparation that your company already does. They are much more detailed and are very costly. If not required at first, the bank might require more extensive financials during your yearly review.
TD Bank’s SBA loan program
Often times, businesses believe that a Small Business Association Loan might be a good option. The SBA might wind up being a good option in the long run. However, the process is longer and more tedious. There are a lot of restrictions and limitations sometimes called convenants to an SBA backed loan.
The SBA works with lenders like TD Bank to provide loans to small businesses. The SBA agency doesn’t lend money directly to small business owners. Instead, it sets guidelines for loans made by its partnering lenders, community development organizations, and micro-lending institutions. The SBA reduces risk for lenders and makes it easier for them to access capital. That makes it easier for small businesses to get loans.
Applying for a business line of credit isn’t easy and it takes a lot of time. Many business owners believe that their company can very easily qualify for a business loan or line of credit until they go through the process.
The way a bank evaluates your business loan is very different than the way you look at your business.
Finally, if you think that you will use your line of credit a lot, then it is worth going through the process with a good bank like TD Bank. Although, if the line of credit is something you will use more as a cash backup plan, then Financing Solutions would be a great alternative.