Published By Janet Gershen-Siegel at November 22, 2017
The best corporate credit secrets are that corporate credit cards can be yours.
A credit line, or line of credit (LOC), is an agreement between a bank or private investor that sets a maximum loan balance which a borrower can access.
A borrower can access funds from their line of credit at any time, so long as they don’t exceed the maximum set in the agreement, and as long as they meet any other requirements of the finance institution or investor such as making on time payments.
Credit lines offer many unique benefits to borrowers including flexibility. Borrowers can make use of their line of credit and just pay interest on what they use, compared to loans where they pay interest on the total 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 are comparable to various other kinds of funding like installment loans. In many cases, lines of credit are unsecured, much the same as credit cards are. There are some credit lines that are secured, and accordingly easier to qualify for
Credit lines are the most regularly requested loan type in the business world although they are very popular, authentic credit lines are scarce, and hard to find. Many are also very hard to get approved for calling for good credit, good time in business, and good financials. But there are various other credit cards and lines that few people know about that are available for startups, bad credit, or even if you have absolutely no financials.
Many credit line types which most business owners picture come from traditional banks and conventional banks use SBA loans as their key loan product for small business owners. This is due to the fact that SBA guarantees as much as 90% of the loan in the event of a default. These credit lines are the toughest to get approved for because you must qualify with SBA and the bank.
There are two primary varieties of SBA loans you can typically obtain. One kind is called CAPLines. There are in fact five kinds of CAPLines that can work for your business.
You can also get a lesser loan amount more rapidly using the SBA Express program. A lot 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 up to and including $5 million. Loan qualification requirements are the same as for other SBA programs.
Seasonal Line: This one advances against expected inventory and accounts receivables. It was created to help seasonal businesses. Loan or revolving are available. Contract Line- Finances the direct labor and material cost associated with performing assignable contracts. Loan or revolving are offered.
Builders Line: Created for general contractors or builders constructing or renovating commercial or residential buildings. It is used to fund direct labor-and material costs, where the building project functions as the collateral. Loan or revolving are offered.
Standard Asset-Based Line: For businesses not able to meet credit standards associated with long-term credit. Funding for cyclical growth, recurrent and/or short-term needs. Repayment stems from converting short-term assets into cash. Businesses constantly draw from the LOC, based upon existing assets, and repay as their cash cycle dictates. This line normally is used by businesses that offer credit to other companies.
Small Asset-Based Line: This asset-based revolving line of credit of as much as $200,000. This line operates like a standard asset-based line except that some of the stricter servicing requirements are foregone, providing the business can regularly show repayment ability from capital for the sum total.
The SBA Express program provides access to a credit line for well-qualified borrowers
You can get approved for up to and including $350,000. Interest rates can be different, with SBA enabling banks to charge as much as 6.5% over their base rate. Loans over $25,000 will need collateral.
To get approved you’ll need great personal and business credit. Plus the SBA says you must not have any blemishes on your report. You will need good bank credit; an acceptable bank score demands you have at least $10,000 in your account over the last 90 days. You’ll also need a resume showing you have business sector experience and a well put together business plan. You will need three years of business and personal tax returns, and your business returns should show a profit. And, you’ll need a current balance sheet and income statement, therefore showing you have the finances to pay back the loan.
To get approved you’ll need account receivables, but only if you have them. As for the collateral to make up for the risk, generally all company assets will be accepted as collateral, and some personal assets which also include your home. It’s not uncommon to need collateral equivalent 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 easier to qualify for than conventional SBA loans. They also demand much less documentation for approval. These alternative SBA credit lines often call for good personal credit for approval.
Unlike with SBA, many of them don’t need good bank or business credit approval. Almost all of these sorts of programs require two years’ of tax returns. Tax returns need to demonstrate a profit. Rates can vary from 7% or higher and loan amounts extend from $25,000 into the millions.
Loan amounts are ordinarily based upon the revenues and/or profits shown on the tax returns. At times lenders may want other financials such as a profit and loss statement, balance sheets, and income statements.
Merchant cash advances have rapidly become the most popular way to get financing, in large part thanks to the easy qualification process. Businesses with 10k in profits can get approved, with the business owner having scores as low as 500. Some sources have now even started to offer credit lines that accompany their loans. You will have to have at least $10,000 in revenue for approval. You should be in business for at least one year, although three years is preferred. Lenders usually want to see a credit score of 650 or higher for approval.
Loan amounts are ordinarily around $20,000. Lenders routinely do pull your business credit, so you should have some credit already established and at times lenders will want to see tax returns. Rates vary based upon risk for this program, and there typically aren’t a lot of funding sources who offer it.
You can get financing regardless of personal credit if you have some type of stocks or bonds. You can also get approved if you have someone intending to use their stocks or bonds as collateral for your financing. Personal credit quality doesn’t matter as there are no consumer credit criteria for approval. You can get approved for as much as 90% of the value of your stocks or bonds. Rates are typically less than 2%, making this one of the lowest rate credit lines you’ll ever see. You can still earn interest as you commonly do on your stocks and bonds.
Credit cards and lines are very similar each other
Credit cards generally offer 0% intro rates for up to two years– very helpful for startups especially. Credit lines allow you to take out more cash at a more affordable rate than do cards. These are the main two differences that will have an effect on 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 qualify for as card approvals are ordinarily very quick, 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 banks offer unsecured business credit cards
A lot of them report to the consumer credit reporting agencies. They all demand a personal guarantee from you. You can get approved normally for one card at the most as they discontinue approving you when you have two or more inquiries on your report.
Most credit card companies offer business credit cards including Capital One, Chase, and American Express. These have rates much like consumer rates and limits are also similar. Some of them report to the consumer reporting agencies, some report to the business bureaus. Approval requirements are similar to consumer credit card accounts.
Frequently, 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 since they don’t know how much other new credit you have lately 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 concentrates on securing business credit cards. This is a very rare, very little know about program that few lending sources offer. They can usually 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 reject you for the other card inquiries. Individual approvals oftentimes range from $2,000 – 50,000.
The end result of their services is that you commonly get up to five cards that resemble the credit limits of your highest limit accounts now. Multiple cards generate competition, and this means you can get your limits raised often within 6 months or fewer of your original approval. Approvals can go up to $150,000 per entity like a corporation. With UBF they actually get you three to five business credit cards that report only to the business credit reporting agencies. This is huge, something the majority of lenders don’t offer or advertise. Not only will you get cash, but you build your business credit as well so within three to four months, you can then use your recently established business credit to get even more money.
The lender can also get you low introductory rates, usually 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 best cards for points, meaning you get the best rewards. Much like with anything, there are substantial benefits in dealing with a source who focuses on this area; the results will be better than if you try to go at it on your own.
You need to have excellent personal credit right now, preferably 685 or higher scores, the same as with all business credit cards. You shouldn’t have any derogatory credit reported to get approved, you must also have open revolving credit on your consumer reports right now and you’ll have to have five inquiries or less in the last six months reported.
All lenders within this space charge a 9-15% success based fee and you only pay the fee off of what you secure. Keep in mind, you get a lot of additional rewards and about three to five times more money through this program than you could get on your own, which is why there’s a fee, the same as all other lending programs.
You can get approved utilizing a guarantor and you can even use a wide range of guarantors to get even more money. There are even other cards you can get making use of 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 such as 0% introductory APRs and five times the amount of approval of a solitary card but they are a lot easier to get approved for. You can get approved with a 650 score and seven inquiries (or fewer) in the last six months and you can have a bankruptcy on your credit and other negative items. These are much easier to get approved for than UBF business credit cards.
With all previous cards mentioned, you will need to have good consumer credit to get approved but what happens if your personal credit isn’t really good, and you do not have a guarantor? This is the time when building business credit makes a ton of sense regardless of whether you have good personal credit, establishing your corporate credit helps you get even more money, and without having a personal guarantee.
Business credit is credit in a company name, that’s connected to the company’s EIN number, and not the owner’s Social Security Number. When done correctly, business credit may be acquired without any personal credit check and without a personal guarantee– something all other cards talked about can’t deliver. You can get three types of business credit cards. Vendor credit, offers net 20 terms used to kick off a business credit profile. Store credit, get credit cards with high limits at most retail stores. Cash and Fleet credit, Visa, MasterCard, American Express cards you can use anywhere. These can be obtained without any credit check or guarantee. Limits are usually $5-10 to begin, and can exceed $50,000.
Your business can get credit cards and financing, if you know where to look.