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When Should I Apply for a Business Line of Credit?

May 31, 2019

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As a small business, you might come across situations in which you need funds on-the-spot to support your growth. Perhaps a surprise expense comes up such as a repair or need for new machinery, or you need to buy more inventory before you sell your products. A business line of credit could be the solution that you’ve been looking for.

What is a Business Line of Credit?
A business line of credit can provide you with the flexibility that a business loan won’t. Essentially, it gives you access to money quickly that can be used when business expenses arise.

Instead of receiving a lump sum from a loan, you can draw money from a predetermined limit as you need it. You only pay interest on the funds you draw from your line of credit. Typically, a line of credit has a lower interest rate than a business loan or credit card.

When Should Your Business Consider a Line of Credit?
Once your business starts to consistently require access to funds to meet short-term capital needs in order to manage your day-to-day operation, you should consider applying for a line of credit. Another reason you might consider a line of credit is if you own a seasonal business and need to bridge the gap between busy seasons.

Think of a line of credit as a short-term solution to fuel your business growth or fund new revenue-generating projects.

Keep in mind that if you are a new business, you will most likely have a hard time qualifying for a line of credit. Your small business should have established business credit and financial records of your revenue before considering a line of credit.

How to Qualify:
In order to qualify for a business line of credit, you will typically need to be in business for over three years. Some other items you will need to have available include a business license, tax returns, at least three months of bank statements, a business bank account, and business financial statements.

You will want to show that your business is profitable (and continuing to trend upwards) and that you have a plan for using your line of credit, as well as the ability to pay it off.

Lines of Credit from Centier
A business line of credit can be a valuable tool for your small business to grow. The local experts at Centier are here to meet the needs of your small business. Seasonal and revolving lines of credit from Centier provide short-term working capital to supplement cash flows.

For small business owners looking to partner with area experts,  meet our team today.

Take advantage of supplier discounts and finance season operating expenses, contact us now!