Commercial Line of Business Requirements
As a new business owner, the phrase “You have to spend money to make money” is anything but new. However, navigating the world of commercial lending and deposits can be confusing and frustrating for startups and small businesses who are still establishing themselves.
In this guide, we aim to demystify a part of the commercial lending world that can be especially helpful for new business owners: a commercial line of credit. This form of financing acts much like a credit card. You have access to a certain amount of money, but you only pay interest on what you borrow. The advantage of a line of credit is that the limits are often higher than that of a credit card, typically ranging between $50,000 and over $1 million.
So, what does it take to qualify for a commercial line of credit, and what’s the best business line of credit provider for a new business? We answer these questions and more.
Can I Get a Loan in Business Credit If I Just Started a Business?
New businesses can have difficulty qualifying for a business loan or line of credit. In fact, the U.S. Chamber of Commerce states that businesses usually need to be in operation for at least six months before lenders will consider an application.
Unfortunately, this can put brand new businesses in a tricky situation—especially because launching a business comes with a lot of upfront costs. From equipment to marketing and inventory to employee wages, the expenses add up quickly.
So, how can new business owners access necessary capital while building their credit for more substantial lending options? A business credit card can be a good start. With a commercial credit card through IMCU, business owners can benefit from:
- Competitive Interest Rates
- No Annual Fee
- Online Access to Financial Statements
Give us a call today to start charting a course for your business’s financial success.
Can a New LLC Get a Business Line of Credit?
It can take a new LLC 12 to 24 months to qualify for a small business line of credit. During this time, new businesses can establish streams of revenue and a credit score to make their applications more appealing to lenders.
After a new LLC proves that their business model is viable, they can secure a commercial line of credit to invest in growth. More capital can fund the development of new products, exciting marketing campaigns, and talented employees that give businesses a competitive edge.
What Credit Score Do You Need for a Business Line of Credit?
Most small business lenders require personal guarantees from company owners, and the higher your credit score is, the easier it will be to secure a commercial line of credit. According to Forbes, a credit score of at least 680 is ideal, but minimum credit score requirements vary from one lender to the next. It can be possible to be approved for a commercial line of credit with a credit score of 580-600, for example.
If you want access to more capital options for your growing business, consider improving your credit by following these steps:
- Incorporate your business.
- Obtain an EIN.
- Open a business bank account.
- Secure a business phone number and email address.
- Open a commercial credit card.
- Pay bills on time.
Ready to explore your options for a commercial line of credit? Start with IMCU!
Can You Get a Business Line of Credit with No Revenue?
Acquiring a business line of credit for a startup without revenue can be challenging, but it’s not impossible. Because businesses without steady cash flow are a higher risk to lenders, financing options will often come with higher interest rates.
Having a high credit score can help your new business qualify for a line of credit, even before you establish streams of revenue . It’s not the only factor, though, as lenders may also consider factors like management history and industry knowledge when determining credit qualifications.
Where Should I Get a Business Line of Credit From?
For many owners, the best business line of credit for a new business is one that they can qualify for. However, you may have more options than you think. When it comes to opening a line of credit, business owners can choose between:
- Commercial Banks: These are institutions that offer a wide variety of financial services with the end goal of earning a profit. Lending—including lines of credit—is part of these services. However, because commercial banks are profit-oriented, they are more likely to turn away riskier applications, such as those from new and smaller businesses.
- Online Lenders: These institutions focus specifically on lending services, such as commercial loans and lines of credit. While online lenders offer convenience, they don’t always achieve the same depth of customer service as traditional financial institutions.
- Credit Unions: Like commercial banks, credit unions offer a range of financial services from savings accounts to commercial loans and lines of credit. However, the key difference is that credit unions are not-for-profit. Instead, the success of credit unions is based on the success of their members, which can have numerous benefits like lower interest rates on loans and more responsive customer service.