Line Of Credit Business Loans

Line of credit business loans are among the easier loans to qualify for if your company meets a certain range of criteria.

Here's How A Line Of Credit Works

You have an established company, probably for a year or more, and have enjoyed at least modest profit and good credit during that time.

Yours is a seasonal business and you need to buy a slew of stuff for the top sales season, maybe back to school or baseball season or Christmas sales. 

Or yours could be a business that simply benefits from "specials" that suppliers sometimes offer IF you have the cash to pay for it, like a mattress store that can get caseloads of closing models of mattresses.

The important part is that you tend to have cycles when you need cash, with subsequent cycles when you can pay it all back.  This is why it is often called a "Revolving Line Of Credit".  It goes in cycles.  You borrow.  You use.  You pay it back.

With good credit, businesses like this likely qualify for line of credit business loans.

What You Need For Line Of Credit Business Loans

Walking into the bank being prepared will get you lots of great brownie points, so go in with everything you think you might need.  The banker will no doubt ask for more any way.

Business Plan.  Depending on how much you are looking for, and how well the bank knows you, you will need a few pages or a full fledged business plan.  If the bank knows you well, and all you need is a few thousand dollar LOC, you won't need anything very complex.  But if you are looking for several hundred thousand in your LOC, go in with a fully targeted business plan, especially if this is a new bank for you.

Financial Statements.  Few loans of any kinds, even line of credit business loans, can be granted without at least three years of financial statements.  If yours are audited or prepared by an accounting firm, great.  If not, go with what you've got.

Personal Guarantee.  The bank will have this form for you to sign, giving them the rights to everything including your first born child.  It will be required.

Documents Specific To The Line Of Credit Business Loan.  Visually demonstrate how this LOC will affect your business, why it is important to you.  Who are the suppliers you will buy from? Why are these opportunities important? What is the bottom line affect on your business?  The banker can't guess at this stuff.  You've got to demonstrate it very clearly.

The Unsecured Line Of Credit

Sometimes an LOC is called "unsecured" because the bank doesn't formally put a lien on your assets.  Not all LOCs are unsecured.  Some are secured by your inventory, your property, your accounts receivable, or other assets.  Read the fine print in your agreement to see what your LOC specifies.  One is not necessarily better than another -- just know what you've got.

The Best Line Of Credit Interest Rate

Nearly all line of credit business loans have negotiable interest rates.  The rate that the bank proposes will be based on such factors as:

• Your history with this bank.
• Your credit history, both business and personal.
• The assets in the business.
• Your personal assets.
• Your formal presentation (i.e., your business plan)

If the rate sounds too high, ask what you can do to decrease it.  You may be able to add a personal guarantee, or come back for a reevaluation in a year.  There may be nothing you can do.  Just find out.

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