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Published By Janet Gershen-Siegel at December 2nd, 2018
Corporate credit cards for new businesses can be yours. But first, let’s talk about business credit lines.
A credit line, or line of credit (LOC), is an agreement between a financial institution or private investor that sets a maximum loan balance which a borrower can access.
A borrower can gain access to funds from their line of credit any time, provided that they don’t go beyond the maximum set in the arrangement, and as long as they meet all other conditions of the financial institution or investor for example, making timely payments.
Credit lines deliver many distinct advantages to borrowers including versatility. Borrowers can utilize their line of credit and merely pay interest on what they use, unlike loans where they pay interest on the total amount borrowed. Credit lines can be re-used, so as you acquire a balance and pay that balance off, you can use that available credit again, and again.
Credit lines are revolving accounts similar to credit cards, and compare to various other forms of financing including installment loans. Oftentimes, lines of credit are not secured, much the same as credit cards are. There are some credit lines that are secured, and therefore easier to qualify for
Did you know credit lines are the most commonly requested loan type in the business world? But although they are very popular, authentic credit lines are unusual, and challenging to find. Many are also very tough to get approval for calling for good credit, good time in business, and good financials.
But there are various other credit cards and lines that few know about that are available for startups, poor credit, or even if you have no financials.
Many credit line types which most entrepreneurs picture come from standard banks and conventional banks use SBA loans as their principal loan product for small business owners. This is because SBA insures as much as 90% of the loan in the case of default.
These credit lines are the hardest to qualify for because you must qualify with SBA and the bank.
There are two primary kinds of SBA loans you can normally get. One form is called CAPLines. There are in fact five types of CAPLines that can work for your business.
You can also acquire a smaller loan amount faster using the SBA Express program. The majority of these programs offer BOTH loans and revolving lines of credit.
According to the SBA: “CAPLines is the umbrella program under which SBA helps business owners meet short-term and cyclical working capital needs”. Loan amounts are available right up to $5 million. Loan qualification criteria are the same as for other SBA programs.
This one advances against expected inventory and accounts receivables. It was created to help seasonal businesses. Loan or revolving types are available.
This one finances the direct labor and material cost associated with executing assignable contracts. Loan or revolving types are on offer.
This one is made for general contractors or builders constructing or renovating commercial or residential buildings. It is used to pay for direct labor-and material costs, where the building project serves as the collateral. Loan or revolving types are available.
For companies unable to meet credit standards associated with long-term credit. Financing for cyclical growth, repeating and/or short-term needs. Repayment comes from transforming short-term assets into money.
Businesses constantly draw from the LOC, based upon preexisting assets, and pay back as their cash cycle determines. This line ordinarily is used by companies that supply credit to other companies.
This asset-based revolving line of credit runs up to $200,000. This line works like a standard asset-based line except that some of the more stringent servicing requirements are foregone, providing the business can regularly show repayment ability from cash flow for the full amount.
You can get approval for as much as $350,000. Interest rates can be different, with SBA enabling banks to charge as high as 6.5% over their base rate. Loans over $25,000 will necessitate collateral.
To get approval you’ll need great personal and company credit. Plus the SBA specifies you must not have any blemishes on your report. You will need good bank credit; an acceptable bank score requires you have at least $10,000 in your account over the most recent 90 days.
You’ll likewise need a resume showing you have market experience and a well put together business plan. And you will need three years of company and personal tax returns, and your business returns should show a profit.
Also you’ll need a current balance sheet and income statement, therefore showing you have the cash to repay the loan.
To get approval you’ll need account receivables, but only if you have them. When it comes to the collateral to make up for the risk, typically all business assets will be accepted as collateral, and some personal assets which also include your residence.
It’s not uncommon to need collateral equal to 50% or more of the loan amount. You also need articles of incorporation, business licenses, and contracts with all third parties, and your lease.
Private investors and alternative lenders also offer credit lines. These are less complicated to qualify for than conventional SBA loans. They also necessitate much less documentation for approval. These alternative SBA credit lines normally require good personal credit for approval.
Unlike with SBA, many of them don’t require good bank or business credit approval. Almost all of these sorts of programs require two years’ of tax returns. Tax returns MUST demonstrate a profit. Rates can vary from 7% or higher and loan amounts extend from $25,000 into the millions.
Loan amounts are normally based upon the revenues and/or profits shown on the tax returns. In some cases lenders may ask for other financials including a profit and loss statement, balance sheets, and income statements.
Merchant cash advances have quickly become the most popular way to get financing, in large part due to the effortless qualification process.
Companies with $10,000 in profits can get approval, with the business owner having scores as low as 500. Some sources have now even started to offer credit lines that go with their loans.
You will need to have at least $10,000 in revenue for approval. You ought to be in business for at least one year, however three years is preferred. Lenders generally want to see a credit score of 650 or higher for approval.
Loan amounts are often around $20,000. Lenders typically will pull your business credit, so you must have some credit already established and at times lenders will want to see tax returns. Rates differ based upon risk for this program, and there usually are not a lot of funding sources who offer it.
You can get financing regardless of personal credit if you have some kind of stocks or bonds. You can also get approval if you have someone wishing to use their stocks or bonds as collateral for financing.
Personal credit quality doesn’t matter as there are no consumer credit requirements for approval. You can get approval for as much as 90% of the value of your stocks or bonds.
Rates are normally less than 2%, making this one of the lowest rate credit lines you’ll ever see. You can still earn interest as you generally do on your stocks and bonds.
Credit cards typically offer 0% intro rates for up to two years. So this is extremely useful for startups especially. Credit lines allow you to take out more cash at a much cheaper rate than do cards. These are the principal two differences that will affect you between credit cards and credit line. Investopedia even says that, “lines of credit are potentially useful hybrids of credit cards.”
Both cards and lines are revolving credit. Credit lines are more difficult to get approval for as card approvals are typically very fast, many times automated, while at the same time line require an in-depth underwriting review.
Lines usually offer lower rates, per Bankrate card rates average 13% while lines average 4%.
Many of them do report to the consumer credit reporting agencies. They all require a personal guarantee from you. You can get approval in general for one card max as they discontinue approving you when you have two or more inquiries on your report.
Most credit card providers offer business credit cards including Capital One, Chase, and American Express. These have rates similar to consumer rates and limits are also similar.
Some of them report to the consumer reporting agencies, some report to the business bureaus. Approval requirements resemble consumer credit card accounts.
Usually, when you apply for a credit card you put an inquiry on your consumer report. When other lenders see these, they will not approve you for more credit for the reason that they do not know how much other new credit you have recently obtain.
So they’ll only approve you if you have fewer than two inquiries on your report within the last six months. Any more than that will get you declined.
With unsecured business financing, you deal with a lender who focuses on securing business credit cards. This is a very uncommon, only a few know of program that few lending sources offer. They can frequently get you three to five times the approvals that you can get on your own.
This is because they know the sources to apply for, the order to apply, and can time their applications so the card issuers won’t refuse you for the other card inquiries. Individual approvals oftentimes range from $2,000 – 50,000.
The result of their services is that you in most cases get up to five cards that mimic the credit limits of your maximum limit accounts now. Multiple cards generate competition, and this means you can get your limits raised in most cases within 6 months or fewer of your original approval.
Approvals can go up to $150,000 per entity for instance, a corporation. With UBF they actually get you three to five business credit cards which report just to the business credit reporting agencies. This is huge, something most lenders don’t offer or advertise. Not only will you get funds, but you build your business credit as well so within three to four months, you can then use your newly established business credit to get even more money.
The lender can also get you low introductory rates, often 0% for 6-18 months. You’ll then pay normal rates after that, typically 5-21% APR with 20-25% APR for cash advances.
And they’ll also get you the very best corporate credit cards for new businesses. And these will generally be for points. So this means you get the best rewards. Just like with just about anything, there are significant benefits in working with a source that specializes in this area; the results will be better than if you attempt to go at it alone.
You have to have excellent personal credit now, preferably 685 or higher scores, the same as with all business credit cards. You shouldn’t have any derogatory credit reported to get approval, you must also have open revolving credit on your consumer reports now and you’ll have to have five inquiries or fewer in the last six months reported.
All lenders in this space charge a 9-15% success based fee and you only pay the charge off of what you secure. Keep in mind, you get a lot of added advantages and about three to five times more cash with this program than you would get on your own, which is why there’s a fee, the same as all other lending programs.
You can get approval using a guarantor and you can even use various guarantors to get even more money. There are even other cards you can get using this same program but these cards only report to the consumer reporting agencies, not the business reporting agencies. They are consumer credit cards versus business credit cards.
They provide similar benefits including 0% intro annual percentage rates and five times the amount of approval of a single card but they are a lot easier to qualify for. You can get approval with a 650 score and seven inquiries (or fewer) in the most recent six months.
And you can have a bankruptcy on your credit and other derogatory items. These are a lot easier to get approval for than UBF corporate credit cards.
With all earlier cards touched on, you have to have good consumer credit to get approval but what if your personal credit isn’t really good, and you do not have a guarantor? This is when building corporate credit makes a great deal of sense even when you have good personal credit, improving your corporate credit helps you get even more money, and without a personal guarantee.
Business credit is credit in a company name, that’s linked to the business’s EIN number, and not the owner’s Social Security Number. When undertaken properly, company credit can be acquired without a personal credit check and no personal guarantee. So this is a thing all other cards discussed can’t provide. You can get three types of corporate credit cards.
The vendor credit tier offers net 30 terms used to start a business credit profile. With the retail credit tier, get credit cards with high limits at most retail stores. With the cash and fleet credit tiers, get Visa, MasterCard, and American Express cards you can use anywhere. These can be obtained with no credit check or guarantee. Limits are usually $5,000 – $10,000 to start. And they can exceed $50,000.
Your business can get credit cards and financing, if you know where to look.