Revolving lines of credit provide the chance to get funding as needed. This open-ended financing option allows you to take as much as you need up to your limit anytime you need it. You then pay back as you can, either fully or through payments. It is like a credit card but usually offers much better interest rates.

This financial product is risky for lenders. So, they will consider a few important factors when approving your application. 

Amount of Money Needed

You will have to explain how much money you want, which will become your limit. If you ask for too much, it is a red flag to a lender and could get you a denial. You must be reasonable.

Consider how much you need and what you can afford to pay back. It is usually best to keep your request at about 20% of your annual profits. 

Use of the Funds

The lender will also be interested in how you plan to use the credit line. You must show that you have a legitimate need for it.

You will need to also have a good plan for how you will use and pay back the loan. The lender would like to see you using the money to benefit your business and help it to grow. 

Cash Flow Situation

You also will need to explain your business’s cash flow situation. You want to show that you have profits and the ability to pay back the credit line when you use it. 

The lender will look for consistency. That does not mean every month you must make a certain profit, but it does mean that you at least show a pattern to your sales that proves they happen like this every year, and you can expect it to continue. For example, if you are slow in the winter but have amazing sales in the summer if that occurs each year, it should be sufficient. 

Age of the Business

If you have a new business, your chances to secure a line of credit are low. Lenders need proof of your income and its consistency. They want to see you have established your company and profits. 

Some lenders may be willing to go off six months of business, but you will have more luck with an older business. Plus, business age will often impact your interest rate, so you will get better deals if your business has been around for a while. 

Secure Your Credit Line Now

If you have an ongoing need for funding for your business, lines of credit can be a great option. Find out if you qualify today.