7. October 2017

Small business owners often have to scramble to keep funds flowing through the course of normal operations. When sales are slow or orders are waiting for payment, bills still need to be paid and inventory or materials brought in. A traditional loan doesn’t make much sense for those situations. In fact, a bank is less likely to give a business a loan for random items. Basic loans, even for businesses, need to have a well-defined purpose, not be used for general expenses.

That’s where the line of credit comes in. A line of credit gives the business owner a useful bank of cash to draw on as needed, making payments back to the bank only on the amount used. When payments are made on the loan, the amount that is principle goes back into the account for future use. Interest rates tend to be lower than with credit cards, and money from a line of credit can be used wherever needed, unlike a vendor account that must be used only at a particular merchant.

Getting a Line of Credit

As useful as this type of bank loan is for a business of any size, small business owners tend to ignore it as a resource. For many, it is a daunting option that seems to difficult to achieve. Getting a business line of credit from a bank to operate your small business is not as scary as it appears to be. It is basically the same as a traditional loan, and banks are actually becoming more open to the prospect of lines of credit vs. loans since loan applications are down due to the economy.

Be Prepared for Success when Applying for a Line of Credit

Make a good impression right from the start, and walk into the lender’s office with all of your paperwork in order. Have a strong business plan to present, and work to create your business’ identity apart from your own. Your company should have its own EIN, also known as Employer Identification Number, from the IRS and a DUNS number from the small business credit company Dun & Bradstreet.

By taking the time to get all of the necessary information together, and having created a business credit score through various credit cards and vendor accounts in your company’s name, you will be in a great position to be accepted by a lender for a line of credit.

Build Business Credit, Business Loan Approvals, Pre-Qualify for Business Loans, Small Business Financing , , , , , ,