How do I get a business line of credit?

To get a business line of credit, you must be the owner of a business that’s been operating for at least 2 years, with a personal credit score of 500 or higher. Eleven of the 15 largest banks and credit unions offer business lines of credit, as do several online lenders. Although the exact requirements vary by lender, getting a business line of credit can be a simple process if you’re qualified and prepared.

Business credit lines can be as short as six months or as long as five years. Generally, you’ll have the best luck getting a long-term business credit line at a traditional bank, whereas online lenders will have a plethora of short-term options.

You should compare different offers and find the one that best matches your financing needs. Once you’ve done that, gather any necessary documents including tax returns, balance statements, and other relevant paperwork described in the terms and conditions for your line of credit. Then you’re ready to apply.

5 Tips for How to Get a Business Line of Credit:

1. Check your credit score. Lenders may not release minimum credit score requirements for business lines of credit. However, your personal credit score is what lenders will primarily look at, since personal credit typically goes back farther and can give a better picture of how you’ve handled your finances.
2. Be in business for two years. You may find lenders willing to extend a business line of credit to companies that have been in business for less than two years, but you’ll need at least six months to be considered, and two years for your best chance at approval.
3. Decide what type of credit line you need. Your options are either a long-term business line of credit (up to 5 years) or a short-term business credit line (6+ months). Short-term business lines of credit are usually faster and more accessible, but also more expensive.
4. Gather all of your paperwork. You’ll need your personal tax returns, business tax returns, bank statements for the business, business registration documents, and all revenue documents.
5. Apply online. Most lenders with business lines of credit have easily accessible online applications. Some smaller banks and credit unions may require you to apply at a branch, however.

Business credit cards, or credit cards in general, can either be an alternative to a business line of credit or a tool to use in addition to one. In fact, unsecured credit cards technically do provide a line a credit.

With both business lines of credit and credit cards, a lender extends you a certain amount of money that you can use whenever needed. You don’t have to use the full amount, and you’ll only pay back what you take from the line of credit. So if you’re extended a business line of credit for $30,000, and need to use $10,000 of it to pay for sudden repairs, you’ll only have to pay back that $10,000 plus interest.

One of the main differences between a business credit card and a business line of credit is the rewards potential. Many business credit cards offer rewards that cardholders earn every time they make a purchase. These rewards can be applied as statement credits to cover purchases, or redeemed for gift cards, travel expenses, etc. This is a very valuable benefit of business credit cards, since you’re essentially getting a discount on every purchase. Business lines of credit do not usually offer any kind of rewards.

Still, business lines of credit may be a better option than business credit cards if you need to make large purchases. Business lines of credit typically have higher credit limits than business credit cards.