Building Business Credit for Small Business
Have you ever had to make a business purchase that’s too large for a credit card and too small for a loa
n?
Wouldn’t it have been so much easier if you had access to a small business credit line?
Well the good news is there are several different types of credit lines that your business can obtain that can be used in order to cover unforeseen operating expenses, development, expansion, legal fees, inventory or a range of other business purchases.
Click to continue …
As a small business owner having access to capital continues to be a growing concern as we start off the New Year. The majority of business owners prefer small business credit lines because it allows a business to establish a significant amount of cash on demand to make purchases that are too large for a credit card and too small for a loan.
I always advise my clients and members to plan applying for a business line of credit during times of growth and cash flow. Banks are more likely to approve a credit line when it doesn’t need the funds compared to one that is financially strapped.
You can improve your chances for securing a business line of credit by listening to my podcast titled How to Secure a Business Line of Credit.
If you think you’re business is just making it fine despite the current economic times and you don’t need the credit line think again! The reality is that your business will at one point require an influx of cash in order to cover unforeseen operating expenses, development, expansion, legal fees, inventory or a range of other items that a business may require in order to grow.
To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>
To Your Success!
Marco Carbajo
About the Author
Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in The Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.
For small business owners, gaining access to capital continues to be a concern as we start off the New Year. The majority of my clients prefer business credit lines because it allows them to establish a significant amount of cash on demand to make purchases that are too large for a credit card and too small for a loan. However, when it comes to qualifying there are specific steps that I advise my clients to establish in order to improve their chances of approval.
First of all, the best time to apply for business credit lines is during times of growth and cash flow. Banks are more likely to approve a credit line to a business when it doesn’t need the funds than when it’s financially strapped. I would strongly encourage you to adopt a “dig your well before you get thirsty” philosophy.
If you think your business is doing just fine despite the current economic times and you don’t need a credit line, think again. The reality is that your business will at one point require an influx of cash in order to cover unforeseen operating expenses, development, expansion, legal fees, inventory, or a range of other issues that a business may face in order to grow.
So when you apply for a credit line and your business is coming from a position of financial strength — if you have a strong bank rating, business credit scores, good cash flow, and so on — your chance of getting approved is much greater than if you apply from a position of weakness.
Second, keep in mind that it’s much easier to get approved for, say, a $50,000 line of credit than a $100,000 line, simply because of the documentation and number of financials required for larger credit lines. Most banks only require a low 5 bank rating, a favorable business credit rating, and personal credit scores of 680 or greater to approve a $50,000 line of credit.
If you’re applying for a credit line greater than $50,000, you’ll also be asked to provide two years of personal and business tax returns, profit and loss statements, and financial statements. The difference in documentation is substantial when it comes to the amount of credit you apply for.
These are the five steps that I review with my clients in order to qualify for a business credit line:
Maximize these five factors and you can greatly improve your chance of getting approved for a business credit line. The important point to remember is that banks are in business to lend money and they make money from the interest they charge. But when they extend a line of credit they want to minimize the risk as much as possible.
To access business credit insider secrets, premium vendors, leasing companies, business credit cards, and lenders that report to all the major business credit bureaus become a member of my Business Credit Insider’s Circle. Submit your name and email below for details and receive a free audio seminar ($597 value) =>
To Your Success!
Marco Carbajo
About the Author
Marco Carbajo is a business credit specialist, author, speaker, and founder of the Business Credit Insider’s Circle. He is a weekly columnist for Dun & Bradstreet Small Business Solutions, a business credit blogger for All Business & American Express Small Business and author of “Eight Steps to Ultimate Business Credit” and “How to Build Business Credit with No Personal Guarantee.” His articles and blogs have also been featured in The Scotsman Guide, Alltop, Entrepreneur Connect, and Active Rain.
While most of you are familiar with the stories surrounding several national banks that have cut business credit lines for small business it’s important to note that there are state banks, credit unions, and some regional banks that are issuing credit lines to small business. Qualifying for small business credit lines is not as difficult as you are led to believe.
When you are prepared and educated on the approval process you can have full confidence in knowing that you can obtain as much bank lines of credit as you need with as many banks as you wish. Now, let me be the first one to admit that the following information does not guarantee an approval but you can bet that it does greatly increase your chances.
Hopefully you already have a business bank account and a comfortable relationship with a banking contact. I suggest you apply for no more than a $50k line of credit because in most cases you will not have to provide tax returns or profit and loss statements. This makes the application process much easier with less paperwork. I have put together the following checklist for you that can be used with as many banks as you wish to establish lines of credit with:
Your small business banking history is vital to your ability of being able to get approved for a line of credit. Your bank will look to see how long that relationship has been established, so once you get your account set-up don’t change banks! There’s nothing wrong with having several business bank accounts and relationships with multiple banks.
Keep in mind that in order to qualify banks will refer to your business bank account because it reflects how you manage your cash flow. Lenders want to know that your business cash flow is capable of handling the business debt and expenses on a consistent basis. Bank accounts with low average daily balances, or that show many NSF returned checks, can get your business loan applications declined right away.
If a loan amount requires a $1,000 month payments then lenders need to see at least a “Low 5″ bank rating. Your “Bank Rating” is based on your average daily minimum balance over the last 3 months. Let’s take a look at these numbers:
| Bank Rating | Account Balance | Bank Rating | Account Balance | |
| Low 4 | $1,000 – $3,999 | Low 5 | $10,000 – $39,999 | |
| Mid 4 | $4,000 – $6,999 | Mid 5 | $40,000 – $69,999 | |
| High 4 | $7,000 – $9,999 | High 5 | $70,000 – $99,999 |
Three Factors Banks Review For Approving A Small Business Line Of Credit
1. The first factor is your balance rating. This rating is your average minimum balance maintained in your account over a three (3) month period. $10,000 will rate as “Low 5″, $5,000 rates as “Mid 4″, $999 rates as “High 3″, and so on. You need to maintain a minimum “Low 5” bank rating ($10,000) for at least 3 months. Unfortunately, without at least a “low 5″ rating, most lenders will assume your business has little ability to repay.
2. The second factor is the bank rating cycle which is three (3) months. You’ll want to have at least a low 5 for the three months prior to applying for a line of credit or larger loan.
3. The third and final factor has to do with how you manage the account. NSF (bounced) checks destroy bank ratings. From this point forward, NSF checks are something you can’t let happen. I would suggest that you add overdraft protection to your account as soon as possible.
This system works every time as long as you’re personal credit scores are 680+ not in the low 500 range. If your scores are in the low 500’s, it’s best to start repairing your credit and consider a CD Secured loan with your bank. Remember, you can set up $50k credit lines with as many banks as you have accounts with! The best part of all is this is just using one of my business credit building strategies!
P.S. CLICK HERE to join as a business credit member and obtain access to my private list of banking contacts and business credit resources.
To Your Success!
About the Author
Marco Carbajo is a business credit specialist, author, speaker, and founder of https://businesscreditbuilders.org. Want to learn more about how to build business credit and obtain unlimited financing for your business? Claim Marco’s popular FREE business credit seminar ($597 Value), available by simply submitting your email below =>