Applying for a credit line takes a few steps. Here are ways to increase the odds when you’re wondering how to get approved for a business line of credit:
1. Check Your Credit Score
Your credit score is a crucial business line of credit qualification and is one of the few aspects of your application that can make or break your chances of success. One of the best ways to get a business line of credit with favorable terms is to have a strong credit score.
Ideally, you’ll apply for a low-interest line of credit with a fair credit score or better (although some lenders will consider applications from applicants with bad credit). According to major credit-reporting agencies, FICO scores are used by 90% of lenders and correspond to the following categories:
- 300-579: Very Poor
- 580-669: Fair
- 670-739: Good
- 740-799: Very Good
- 800-850: Exceptional
As a rule, you should expect a higher annual percentage rate (APR) on your loan or credit line if you have a FICO score of 600 or less. Online lenders may be the best way of getting a business line of credit with bad credit or getting approved if you haven’t yet established a credit history.
2. Gather Your Documents
Once you’re ready to apply, you’ll need to collect various documents and pieces of identification that the lender will ask for on the business line of credit application form.
Online application processes are relatively streamlined compared with banks or conventional lenders. There are crucial pieces of information many creditors seek when getting a line of credit for your business, including:
- One form of a government-issued identification
- Tax returns
- Bank statements
- Cash-flow statements (i.e., balance sheet and profit-and-loss statements)
- Articles of incorporation
Although not all of these documents may be required by the lender you choose, it’s a good idea to cover all your bases and maximize the number of documents you collect during the pre-application phase.
3. File the Application
At this point, you’ve settled on the lender and gathered all the documents you need to get started submitting your business line of credit application form. All that’s left to do is go to your lender’s website and follow the application process.
If you’ve decided to apply for your business line of credit through a bank or credit union, you might need to schedule an appointment with their in-house loan officer.
In some cases, applying online can take minutes. Once the application is complete, you’ll be notified the lender has received your file and that it’s under review. From there, an algorithm will vet your application, check your business line of credit qualifications and send your file through an underwriting process.
With many nonbank lenders, you can expect to hear whether your application was approved within a day. If you’re applying through a bank or are filing for a secured loan, you can expect the turnaround time to be longer.