Business Line of Credit

A business line of credit is not your every day business loan.  As a matter of fact it shouldn't be treated like a business loan at all.  It also should not be treated like a business credit card either.

Once your business has created a solid corporate credit foundation, opened a business bank account and has been approved for a small beginner business credit card, it might be time to apply for a business line of credit.  The reason why it is a good idea to have a business line of credit for your company is for cash flow reasons.  A line of credit for your business is not designed to be used for working capital or to grow your business.  It is more meant for emergency situations to get you through a tough cash flow period.  If you have a month where you cannot pay your vendors or make payroll, that business line of credit can come in very handy.

A business line of credit is not to be used for working capital reasons but more for cash flow emergencies

In order to be approved for a business line of credit it is important that your business has first done the following things:

- Incorporated in your state as a true legal business name

- Opened a business bank account with an EIN number under your business name

- Make sure your personal credit score is above a 680

- Been approved for a small business credit card that reports to the business credit reporting agencies and not the personal credit reporting agencies.

Once you and your business has completed the above items, it will be much easier being approved for a line of credit for your business.  It will also ensure you that your personal credit score will not be destroyed as each time a lender pulls your credit your personal credit score takes a hit.

Make sure the lender you are using reports your positive payments to the business credit reporting agencies and not the personal credit reporting agencies

When applying for a business line of credit be sure to ask the lender as many questions as you can.  One of the most important questions you can ask the lender is whether or not the lender will report your positive payments to the business credit reporting agencies and not the personal credit reporting agencies.  Separating your personal credit from your business credit is the number one goal when it comes to owning and operating a new business.  This will protect you and your personal credit score from anything they may happen within the walls of your business.

 

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