Published By Janet Gershen-Siegel at January 28, 2018
Want credit cards for small businesses? They are not out of reach. We can show you how to get them easily and quickly.
A credit line, or line of credit (LOC), is an agreement between a borrower and a financial institution or private investor which sets a maximum loan balance that a borrower can access.
A borrower can access funds from their line of credit any time, provided they don’t go beyond the maximum set in the arrangement, and so long as they meet all other requirements of the bank or investor including making prompt payments.
Credit lines provide many unique advantages to borrowers including versatility. Borrowers can make use of their line of credit and just pay interest on what they use, in contrast to 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 kinds of funding such as installment loans. Often, lines of credit are not secured, much the same as credit cards are. There are some credit lines which are secured, and for this reason easier to be granted
Credit lines are the most regularly sought after loan type in the business world although they are very popular, real credit lines are uncommon, and difficult to find. Many are also very difficult 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 attainable for startup companies, bad credit, and even if you have absolutely no financials.
Many credit line kinds that most entreprenuers imagine come from standard banks and standard banks use SBA loans as their foremost loan product for small business owners. This is due to the fact that SBA covers 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 main types of SBA loans you can commonly get. One kind is called CAPLines. There are really five forms of CAPLines that can work for your small business.
You can also get a lesser loan amount faster using the SBA Express program. A lot 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 right up to $5 million. Loan qualification prerequisites are the same as with other SBA programs.
Seasonal Line: This one advances against expected inventory and accounts receivables. It was designed to aid seasonal businesses. Loan or revolving are offered. Contract Line- Finances the direct labor and material cost associated with executing assignable contracts. Loan or revolving are available.
Builders Line: Developed for general contractors or builders constructing or renovating industrial or residential buildings. It is used to finance direct labor-and material costs, where the building project functions as the collateral. Loan or revolving are available.
Standard Asset-Based Line: For companies not able to meet credit standards connected with long-term credit. Funding for cyclical growth, recurrent and/or short-term needs. Repayment arises from converting short-term assets into cash. Businesses continually 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 functions like a standard asset-based line save that a few of the more stringent servicing requirements are waived, providing the business can consistently show repayment ability from available resources for the full amount.
You can get approved for up to $350,000. Interest rates can be different, with SBA allowing banks to charge as high as 6.5% over their base rate. Loans in excess of $25,000 will necessitate collateral.
To get approved you’ll need great personal and company credit. Plus the SBA states 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 industry practical 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 recent balance sheet and income statement, thereby showing you have the finances to repay the loan.
To get approved you’ll need account receivables, but only if you have them. When it comes to the collateral to counterbalance the risk, usually all business assets will be taken as collateral, and some personal assets including your home. It’s not uncommon to need collateral equal 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 easier to qualify for than conventional SBA loans. They also necessitate much less documentation for approval. These alternative SBA credit lines usually demand good personal credit for approval.
Unlike with SBA, many of them don’t necessitate good bank or business credit approval. Most 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 range from $25,000 into the millions.
Loan amounts are in most cases 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 quickly become the most popular way to get financing, in large part due to the effortless 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 accompany 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 frequently want to see a credit score of 650 or higher for approval.
Loan amounts are frequently around $20,000. Lenders frequently will pull your business credit, so you need to have some credit already established and sometimes lenders will want to see tax returns. Rates differ based on 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 sort of stocks or bonds. You can also get approved if you have somebody intending 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 normally 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 ordinarily offer 0% intro rates for up to two years– extremely useful for startups in particular. Credit lines allow you to take out more cash at a much cheaper rate than do cards. These are the principal two differences which 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 qualify for as card approvals are normally very quick, many times automated, while line require an in-depth underwriting review. Lines usually offer lower rates, per Bankrate card rates average 13% while lines average 4%.
Unsecured business credit cards may be just the thing for you.
The majority of them report to the consumer credit reporting agencies. They all need a personal guarantee from you. You can get approved generally for one card at the most as they stop approving you when you have two or more inquiries on your report.
Most credit card companies furnish 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.
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 because 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. Anymore will get you refused.
With unsecured business financing, you work with a lender who specializes in securing business credit cards. This is a very uncommon, hardly any know of program which few lending sources offer. They can frequently 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 refuse you for the other card inquiries. Individual approvals normally range from $2,000 – 50,000.
The end result of their services is that you normally 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 which report just to the business credit reporting agencies. This is significant, something the majority of lenders don’t offer or publicize. Not only will you get money, but you build your business credit as well 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, commonly 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 best rewards. Just like with just about anything, there are HUGE benefits in partnering with a source who focuses on this area; the results will be far better than if you try to go at it by yourself.
You must have excellent personal credit right now, preferably 685 or higher scores, the same as with all business credit cards. You shouldn’t have any negative 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 in 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 lot of extra benefits and about three to five times more money in 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 approved using 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 which include 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 negative items. These are a lot easier to get approved for than UBF company credit cards.
With all previous cards touched on, you have to have good consumer credit to get approved but what if your personal credit isn’t good, and you do not have a guarantor? This is when building corporate credit makes a ton of sense even if you have good personal credit, building your corporate credit helps you get even more money, and without having a personal guarantee.
Business credit is credit in a business name, that’s linked to the business’s EIN number, and not the owner’s Social Security Number. When undertaken correctly, business credit can be secured without any personal credit check and no personal guarantee– a thing all other cards brought up can’t provide. You can get three types of company credit cards. Vendor credit, offers net 20 terms used to launch a business credit profile. Store credit, get credit cards with high limits at most shops. Cash and Fleet credit, Visa, MasterCard, American Express cards you can use anywhere. These may be obtained without any credit check or guarantee. Limits are often $5-10 to start, and can exceed $50,000.
Your small business can get credit cards and financing, if you know where to look.