How to Get Approved for a Business Line of Credit

Insufficient cash can spell disaster for your business. All businesses need cash to cover expenses. In addition to inventory, your business may incur expenses related to payroll, insurance, marketing and more. While you can always seek a loan, another form of financing is a line of credit. A business line of credit will allow you to draw cash from an account, which you can use to cover your business’s expenses.

How to Get Approved for a Business Line of Credit

What Is a Business Line of Credit?

You might be wondering what is a business line of credit. There are personal and business lines of credit, both of which act as revolving loans. Personal lines of credit are simply intended for individuals, whereas business lines of credit are intended for businesses.

With a business line of credit, you’ll have access to a maximum amount of cash. All business lines of credit have a limit. You can draw cash from a business line of credit as long as you stay under this limit.

Run a Credit Report

Before applying for a business line of credit, you should run a credit report. Lines of credit are offered by lenders, including banks and alternative lenders. While different lenders have their own approval process, most of them will evaluate your credit. They’ll look at both your personal credit and your business credit to determine whether to approve your application for a line of credit. By running a credit report — for both your personal and business credit — you can identify and fix discrepancies.

Consider a Secured Business Line of Credit

There are unsecured and secured business lines of credit. An unsecured business line of credit is characterized by a lack of collateral, whereas a secured business line of credit requires collateral.

Because secured business lines of credit require collateral, they are easier to obtain than unsecured business lines of credit. Lenders are more likely to approve your application for a secured business line of credit due to the presence of collateral backing it.

Provide a Business Plan

Another tip to get approved for a business line of credit is to provide the lender with a business plan. Lenders want to know that your business will be able to pay off any debt incurred from the line of credit. With a business plan, you can give lenders this reassurance.

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