Many small business owners don’t think about unsecured business lines of credit until they badly need them, but if you don’t plan ahead, they can be difficult to obtain. It’s best to apply when your business has plenty of cash and you can prove that you’ll be able to pay it back. Not sure what the steps are to getting your own business line of credit? Try following this list to get a leg up on those that aren’t prepared.
Register as a Business and Maintain a Positive Bank History
The very first step towards financial freedom is to register your business with the main credit agencies. These differ from personal credit agencies. You’ll need Equifax, Experian and Dun & Bradstreet. Registration is free with all three.
After registration, you’ll need to prove that you’re financially stable. Consistent deposits and minimum balances are important and you need to avoid any bounced checks and ACH payments. It doesn’t hurt to grow a professional relationship with your branch manager and business banker as well since they’ll be helping you with your application down the line.
Establish a Credit History
Once your bank account is steady, the next step to getting approved for unsecured business lines of credit is to establish a positive credit history. Do this by applying for business cell phones and credit cards, as well as Net/30 payment schedules billed from vendors. The latter count as short-term credit. As long as you make all of your payments on time, your credit score should improve and make you more appealing to banks.
Create a Business Plan and Bring It to the Bank
After you have built a positive bank account and credit history, you’re ready to build a business plan and bring it to the bank. You’ll need to note what you plan to do with the money and what services your company provides. Even if the bank doesn’t require a business plan, it shows initiative and professionalism when you create one for them.
Provide Documentation and Point Out High Credit Scores If Applicable
Lastly, you’ll need to provide the proper documentation. The bank will already have your credit report and banking history, so pay attention to bills and business plans instead. Also, be sure to point out a high credit score if you have one to show that you know what you’re worth.
It’s a multi-step process to get approved for unsecured business lines of credit. Be sure to follow the tips on this list and you’ll have a better chance at approval for your small business.
