Published By Janet Gershen-Siegel at February 8, 2018
We can show you how to get a business credit card – even if you don’t think you can. We even show you how to get a business credit line.
A credit line, or line of credit (LOC), is an agreement between a borrower and a bank or private investor which sets a maximum loan balance which a borrower can access.
A borrower can gain access to funds from their line of credit anytime, provided they don’t go over the maximum set in the arrangement, and as long as they meet any other requirements of the financial institution or investor for example, making prompt payments.
Credit lines furnish many distinct advantages to borrowers which include convenience. Borrowers can use 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 other types of financing like installment loans. Frequently, lines of credit are unsecured, much the same as credit cards are. There are some credit lines that are secured, and accordingly easier to get approved for
Credit lines are the most frequently sought after loan type in the business world although they are popular, true credit lines are few and far between, and not easy to find. Many are also very difficult to get approved for requiring good credit, good time in business, and good financials. But there are other credit cards and lines which few people know about that are attainable for startup companies, bad credit, as well as if you have no financials.
Most credit line types which most business owners imagine come from conventional banks and traditional banks use SBA loans as their main loan product for small business owners. This is because SBA covers as much as 90% of the loan in the event of a default. These credit lines are the most challenging to qualify for because you must qualify with SBA and the bank.
There are two main forms of SBA loans you can generally get. One form is called CAPLines. There are actually 5 types of CAPLines that can work for your business.
You can also secure a smaller loan amount more rapidly 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 offered right up to $5 million. Loan qualification criteria are the same as for other SBA programs.
Seasonal Line: Advances against expected inventory and accounts receivables. It was created to help seasonal businesses. Loan or revolving are offered. 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 pay for 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 on preexisting assets, and repay as their cash cycle determines. This line commonly is used by businesses that offer credit to other companies.
Small Asset-Based Line: Asset-based revolving line of credit of as much as $200,000. This line functions like a standard asset-based line except that a few of the more stringent servicing requirements are waived, if the business can regularly show repayment ability from capital for the total.
You can get approved for right up to $350,000. Interest rates vary, with SBA allowing banks to charge as much as 6.5% over their base rate. Loans in excess of $25,000 will require collateral.
To get approved you’ll need good personal and business credit. Plus the SBA specifies you should not have any blemishes on your report. You 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 business sector experience and a well put together business plan. 3 years of company and personal tax returns … your business returns should show a profit. And, you’ll need a recent balance sheet and income statement, therefore showing you have the funds to repay the loan.
To get approved you’ll need account receivables, but just if you have them. As for the collateral to balance out the risk, generally all business assets will be taken as collateral, and some personal assets including your home. It’s not unheard of 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 get approved for than conventional SBA loans. They also require much less documentation for approval. These alternative SBA credit lines ordinarily call for good personal credit for approval.
Unlike with SBA, many of them don’t require good bank or business credit approval. Many of these sorts of programs require two years’ of tax returns. Tax returns MUST demonstrate a profit. Rates can vary from 7% or greater and loan amounts extend from $25,000 into the millions. Loan amounts are often based upon the revenues and/or profits reflected 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 as a result of the effortless qualification process. Businesses with 10k in revenue can get approved, with the business owner having scores as low as 500. Some sources have now even begun to offer credit lines that accompany their loans. You will have to have at least $10,000 in revenue for approval. You ought to be in business for a minimum of one year, though three years is preferred. Lenders often want to see a credit score of 650 or higher for approval.
Loan amounts are often approximately $20,000. Lenders normally will pull your business credit, so you must have some credit already established and in some cases 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 despite personal credit if you have some kind of stocks or bonds. You can also get approved if you have someone 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 commonly less than 2%, making this one of the lowest rate credit lines you’ll ever see. You can nevertheless earn interest as you commonly do on your stocks and bonds.
Credit cards typically offer 0% intro rates for up to two years– very valuable for startups in particular. Credit lines allow you to take out more cash at a much cheaper rate than do cards. These are the primary 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 harder to qualify for as card approvals are commonly very fast, many times automated, while line require an in-depth underwriting review. Lines usually offer lower rates, according to 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 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 providers furnish business credit cards including Capital One, Chase, and American Express. These have rates much like consumer rates and limits are also similar. Some report to the consumer reporting agencies, some report to the business bureaus. Approval requirements resemble consumer credit card accounts.
Generally, when you apply for a credit card you put an inquiry on your consumer report. When other lenders see these, they won’t approve you for more credit for the reason that they aren’t sure 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 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; very few know of program which few lending sources offer. They can normally 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 usually range from $2,000 – 50,000.
The result of their services is that you usually 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 normally within six months or less of your initial approval. Approvals can go up to $150,000 per entity such as a corporation. With unsecured business financing they actually get you three to five business credit cards that report only to the business credit reporting agencies. This is huge, something most lenders don’t offer or advertise. Not only will you get money, 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 very 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 very best cards for points, meaning you get the best rewards. Like with just about anything, there are huge benefits in partnering with a source who concentrates on this area; the results will be far better than if you try to go at it by yourself.
You have to have excellent personal credit now, ideally 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 charge off of what you secure. Keep in mind, you get a lot of additional perks and about three to five times more money in 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 multiple 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 as opposed to business credit cards.
They supply 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 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 derogatory items. These are much easier to get approved for than UBF business credit cards.
With all previous cards mentioned, you have to have good consumer credit in order to get approved but what if your personal credit isn’t good, and you don’t have a guarantor? This is the time when building company credit makes a great deal of sense even if you have good personal credit, setting up your company credit helps you get even more money, and without a personal guarantee.
Company credit is credit in a company’s name, that is associated with the business’s EIN number, and not the owner’s Social Security Number. When undertaken correctly, company credit may be obtained without any personal credit check and no personal guarantee– a thing all other cards discussed can’t provide. You can get three types of corporate 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 stores. 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 normally $5-10 to start, and can exceed $50,000.
Company credit cards can be yours, even with poor credit, provided you know where to look.