A business line of credit is one of the most useful assets any company could have, but securing a line of credit can be difficult. There are a number of requirements which most lenders will impose on you, in order to determine whether or not you’re a good candidate for obtaining a line of credit. Here are some of the factors that a lender will take into account when considering your eligibility.
Most lending institutions will require collateral in order to consider you for a line of credit. The kinds of collateral which would be considered are generally real estate, inventory, machinery, and perhaps even Accounts Receivable. The lender will want to know that they can recover the amount of the loan, in case you should default on payments.
Strong Profits and Revenues
Your business must be able to demonstrate steady incoming revenues, and beyond that, you have to be able to demonstrate profitability. If revenues significantly exceed your expenses, your business is probably going to be profitable, and that will make you a good candidate for a line of credit.
Time in Business
For the most part, lenders will want to see that a company has been in business for at least two years before extending a line of credit. This shows the lender that you have already survived the startup phase, and that your company has some experience in its field.
When reviewing your company as a candidate for a line of credit, most lending institutions will also examine your financial ratios. These will tell the lender whether or not you’re able to pay short-term debts and expenses, and whether you have too much debt in order to maintain positive cash flow. A lender will want to know that your company has the capability of generating enough revenue to manage its expenses, and also pay off any debts which have been incurred.
Would your small business benefit by having a line of credit?
With a business line of credit, your small business can be virtually immune from cash flow shortages, and you may even have the funding you need to trigger significant business growth. Contact us at Prime Wealth Development, so we can discuss some options that may allow you to acquire the business line of credit you need for greater success.