When you’re ready to apply for a line of credit, you’ll need to follow a few steps. Here are ways to increase the odds when you’re wondering how to get approved for a business line of credit:
1. Check Your Credit Score
Your credit score is a crucial business line of credit qualification and is one of the few aspects of your application that can make or break your chances of success. One of the best ways to get the best business line of credit rates and terms is to have a strong credit score.
Ideally, you’ll apply for a low-interest line of credit with a fair credit score or better (although some lenders will consider applicants with bad credit). According to Experian, FICO credit scores are used by many lenders and correspond to the following categories:
- 300-579: Very Poor
- 580-669: Fair
- 670-739: Good
- 740-799: Very Good
- 800-850: Exceptional
As a rule, you should expect a higher annual percentage rate (APR) on your loan or credit line if you have a FICO score of 600 or less. Online lenders may be the best way of getting a small business line of credit with bad credit or getting a business line of credit for a new business that may have just a few months in operation.
2. Gather Your Documents
Once you’re ready to apply, you’ll need to collect various documents and pieces of identification the lender will ask for on the business line of credit application.
While online lender applications are relatively streamlined compared with conventional lenders, such as banks and credit unions, there are crucial pieces of information many creditors seek when you’re getting a line of credit for your business, including:
- Tax returns
- Bank statements
- Cash-flow statements (i.e., balance sheet and profit-and-loss statements)
- Articles of incorporation (if applicable)
- One form of a government-issued identification
Although not all of these documents may be required by the lender you choose, it’s a good idea to collect these documents during the pre-application phase.
3. File the Application
At this point, you’ve settled on a lender and gathered all the documents you need to get started on your business line of credit application form. All that’s left to do is go to your lender’s website and follow the application process.
If you’ve decided to apply for your business line of credit through a bank or credit union, you might need to schedule an appointment with an in-house loan officer.
If you’re applying online, the process could take just a few minutes. Once the application is complete, you’ll be notified when the lender has received your file and that it’s under review. From there, an algorithm will vet your application, check your business line of credit qualifications and send your file through an underwriting process.
With many nonbank lenders, you may receive a funding decision within a day. If you’re applying through a bank or filing for a secured loan, the turnaround time will likely be longer.
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