5 Financial Requirements For Small Business Line Of Credit Approval

There are several small business line of credit requirements for startups. Business lines of credit revolve around a loan that permits access to a specified amount of capital. Naturally, businesses use this capital when they are required to meet short-term needs. As a business owner, you should learn the small business line of credit requirements to cover reoccurring expenses and minimize critical business cash flow gaps. This way, you can flexibly draw the amount needed, pay only for what is used, and prepare for future opportunities. Read on and learn about the several small business line of credit requirements for startups.

Choose Between Secured Or Unsecured

First off, you need to choose a small business line of credit for your startup. Secured lines of credit require assets to be put against the loan for collateral. Ask your lender to accept collateral in the form of inventory and accounts receivable. Typically, lenders won’t request valuable assets like real estate properties and equipment. Keep in mind, the lender will take your collateral if you fail to pay off the loan. On the other hand, unsecured lines of credit require no assets for collateral. Although, you must meet the lender’s higher requirements since they are taking on higher risk. Of course, you should be prepared to report your credit scores and yearly revenue. Certainly, choose a small business line of credit for your small business startup.

Find A Lender

Next, finding a direct lender is another small business line of credit requirement for your startup. Banks and credit unions provide secures, unsecured, and even SBA lines of credit. Typically, they retain highly competitive interest rates with strict qualification requirements. You must have strong income, excellent credit history, and multiple years of experience as a business. Physical lenders are more likely to charge annual, inactivity, and other types of fees. Unlike local banks and credit unions, online lenders have more flexible requirements. For instance, they are more willing to work with small businesses and startups even with bad credit scores. Plus, online lenders have streamlined application processes, minimal fees, and issue credit within a couple of days of approval. Surely, one of the requirements to get a small business line of credit is to find a lender.

Report Credit Score

In addition, a credit score is required to get a small business line of credit for startups. With a credit score of 625 or higher, you’ll get more options, better terms, and low interest rates. If you seek lines of credit through a bank or SBA, you should have a credit score of 675. Keep in mind, even lenders without a credit score minimum still check your score before funding the application. If your score is low, be prepared to meet other requirements for your business line of credit. While some lenders analyze business credit scores for eligibility, most will rely on personal scores. For sure, credit scores are one of the requirements to get a small business line of credit as a startup.

Provide Annual Revenue

Furthermore, annual revenue is another requirement to get a small business line of credit for startups. Verify you have strong revenue and cash flow to pay back your business line of credit. Typically, lenders will ask to review your small businesses bank statements. Not to mention, linking your bank account to find proof of consistent growing income over the months. Furthermore, you should expect each lender to have various yearly revenue requirements. While $120,000 – $150,000 is the average minimum in terms of yearly revenue, there are other options to qualify with a lower number. Definitely, annual revenue is a requirement to obtain a small business line of credit as a startup.

Submit An Application

Of course, submitting applications are requirements to get a small business line of credit for your startup. You can either submit an application online or in person. Once you have submitted, it can take anywhere from 10 minutes to a week to get the decision. Also, the lender may require additional documentation like your name, business, social security, loan amount, or business tax ID. If the lender decides to approve your application, you’ll receive a loan agreement. Before signing the document, read over it carefully to secure the business line of credit. Certainly, filling out an application is required to obtain a small business line of credit for your startup.

There are several small business line of credit requirements for startups. First, choose a secured or unsecure line of credit. In addition, find a lender and review interest rates. Next, report your business and personal credit score. Also, provide the annual revenue for the lender. Of course, submit an application and file for the business line of credit. Read the points highlighted above to learn about the small business lines of credit requirements for startups.