The loan application process can be intimidating when your business is just getting started. You may wonder if your personal credit score is high enough to compensate for your new company’s lack of credit history. Fortunately, there are so many lenders currently offering lines of credit that you are sure to find one that is right for you.
1. Assess Your Financial Situation
Start by checking your company’s credit score. If it is low or non-existent, look at your personal score. That may be high enough to qualify your business for a line of credit. Look at your recent revenue numbers and see if they have been consistent or growing over the past six months to a year.
2. Consider Your Options
You may want to start by talking to your banker. Ask about the lines of credit they offer. Banks are more likely to work with you if you have already established a relationship with them, particularly if you are running all of your operational cash flow through your account. In addition to your banker, there are many lenders to consider, and alternative lenders have more flexibility since they aren’t bound by the banking rules.
3. Assemble Your Data
The bank or other lender will ask for a financial package including an income statement, balance sheet, cash flow statement, accounts receivable aging report and an accounts payable ledger. If you are not working with your regular bank, you’ll also need bank statements going back six months to a year, depending on their requirements. It helps to have all this information compiled before they ask for it. If there is something on their standard information request list that you haven’t included, at least the bulk of the work will already be done.
4. Select Your Lender
Once your financial package is assembled, it’s time to select a lender and submit an application. These days the qualification process is relatively quick, so you will likely have your answer within a week or less. If the answer is no, just move on to the next lender on your list and ask about their lines of credit.
Getting a business line of credit isn’t as daunting as it may sound. After looking at your financial situation, if you believe your personal and business credit scores are adequate and your company is bringing in consistent revenue, do your research and determine your options. Then, assemble your financial data and decide which lender you will submit an application to first. When your credit line is approved, and you realize the benefits, the process will have been well worth the effort.