Published By Janet Gershen-Siegel at March 26, 2018
You can get a credit card for new business. And we can show you how you can get a credit card for startups.
A credit line, or line of credit (LOC), is an agreement between a financial institution or a private investor with a business, which sets a maximum loan balance that a borrower can access.
A borrower can gain access to funds from their line of credit at any time, provided they don’t go over the maximum set in the arrangement, and so long as they meet all other requirements of the bank or investor including making timely payments.
Credit lines deliver many distinct benefits to borrowers which include flexibility. Borrowers can make use of their line of credit and merely pay interest on what they use, as opposed to loans where they pay interest on the full amount borrowed. Credit lines can be reused, 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 types of funding such as installment loans. Frequently, lines of credit are unsecured, much the same as credit cards are. There are some credit lines which are secured, and therefore easier to be granted
Credit lines are the most typically requested loan type in the business world although they are preferred, authentic credit lines are unusual, and hard to find. Many are also very hard to get approved for requiring good credit, good time in business, and good financials. But there are other credit cards and lines that few people know about that are attainable for startups, bad credit, or even if you have absolutely no financials.
Many credit line kinds that most business owners imagine come from standard banks and standard banks use SBA loans as their principal loan product for small business owners. This is due to the fact that SBA insures as much as 90% of the loan in the case of default. These credit lines are the most difficult to qualify for because you must qualify with SBA and the bank.
There are two principal forms of SBA loans you can normally obtain. One kind is called CAPLines. There are in fact five kinds of CAPLines that can work for your business.
You can also obtain a lesser loan amount more quickly using the SBA Express program. Many of these programs offer BOTH loans and revolving lines of credit. From 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 $5 million. Loan qualification prerequisites are the same as for other SBA programs.
Seasonal Line: This one advances against foreseen inventory and accounts receivables. It was designed to assist 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 business 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 available.
Standard Asset-Based Line: For companies unable to meet credit standards associated with long-term credit. Financing for cyclical growth, recurrent and/or short-term needs. Repayment arises from transforming short-term assets into cash. Businesses constantly draw from the LOC, based upon existing assets, and repay as their cash cycle dictates. This line commonly is used by companies that supply credit to other businesses.
Small Asset-Based Line: This asset-based revolving line of credit of as much as $200,000. This line works like a standard asset-based line except that a few of the more stringent servicing requirements are waived, so long as the business can regularly show repayment ability from capital for the sum total.
You can get approved for right up to $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 call for collateral.
To get approved you’ll need good personal and business credit. Plus the SBA specifies 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 most recent 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 money to pay back the loan.
To get approved you’ll need account receivables, but only if you have them. As for the collateral to offset the risk, typically 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, contracts with all third parties, and your lease.
Private investors and alternative lenders also grant credit lines. These are less complicated to qualify for than conventional SBA loans. They also demand much less documentation for approval. These alternative SBA credit lines typically need good personal credit for approval.
Unlike with SBA, many of them don’t need good bank or business credit approval. Most of these kinds of programs call for two years’ of tax returns. Tax returns must show a profit. Rates can vary from 7% or more and loan amounts extend from $25,000 into the millions.
Loan amounts are generally 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 because of the simple qualification process. Companies with 10k in revenue can get approved, 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 should be in business for at minimum 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 approximately $20,000. Lenders commonly do pull your business credit, so you ought to have some credit already established and sometimes 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 irrespective of personal credit if you have some kind of stocks or bonds. You can also get approved if you have somebody wishing to use their stocks or bonds as collateral for your financing. Personal credit quality doesn’t matter as there are no consumer credit requirements 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 generally do on your stocks and bonds.
Credit cards typically offer 0% intro rates for up to two years– extremely valuable for startups especially. Credit lines allow you to take out more cash at a more affordable 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 tougher to get approved for as card approvals are usually 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%.
Most of them report to the consumer credit reporting agencies. They all demand a personal guarantee from you. You can get approved in general for one card max 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 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 are similar to consumer credit card accounts.
Normally, 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 less than two inquiries on your report within the last six months. Any more will get you declined.
With unsecured business financing, you partner with a lender who specializes in securing business credit cards. This is a very unusual, very little know about program that few lending sources offer. They can generally get you three to five times the approvals that you can get on your own. This is due to the fact that they know the sources to apply for, the order to apply, and can time their applications so the card issuers won’t decline you for the other card inquiries. Individual approvals ordinarily range from $2,000 – 50,000.
The result of their services is that you typically get up to five cards that simulate the credit limits of your highest limit accounts now. Multiple cards generate competition, and this means you can get your limits raised more often than not within 6 months or fewer of your first approval. Approvals can go up to $150,000 per entity such as a corporation. With UBF they actually get you three to five business credit cards that report solely to the business credit reporting agencies. This is huge, something most lenders don’t offer or publicize. Not only will you get funds, but you build your business credit also so in three to four months, you can then use your newly established business credit to get even more money.
The lender can also get you very low introductory rates, generally 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 cards for points, which means you get the very best rewards. Like with just about anything, there are HUGE benefits in dealing with a source who focuses on this area; the results will be much better than if you try to go at it alone.
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 now and you’ll need to have five inquiries or fewer in the last six months reported.
All lenders within this space charge a 9-15% success based fee and you only pay the charge off of what you secure. Bear in mind, you get a number of additional rewards and about three to five times more money with this program than you can 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 several 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 as opposed to business credit cards.
They furnish similar benefits including 0% intro APRs and five times the amount of approval of a single card but they’re much easier to qualify 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 derogatory items. These are a lot easier to get approved for than UBF company credit cards.
With all previous cards mentioned, you should have good consumer credit in order to get approved but what happens if your personal credit isn’t good, and you do not have a guarantor? This is when building corporate credit makes a great deal of sense even if you have good personal credit, improving your business credit helps you get even more money, and without a personal guarantee.
Company credit is credit in a business name, that’s associated with the company’s EIN number, and not the owner’s Social Security Number. When carried out correctly, company credit may be acquired without a personal credit check and without a personal guarantee– something all other cards brought up can’t deliver. You can get three types of business credit cards. Vendor credit, offers net 20 terms used to set up a business credit profile. Store credit, get credit cards with high limits at most retailers. Cash and Fleet credit, Visa, MasterCard, American Express cards you can use anywhere. These can be gotten with no credit check or guarantee. Limits are typically $5-10 to start, and can exceed $50,000.
Your business can get credit cards and financing, if you know where to look.