Revolving lines of credit are an invaluable resource for any business. They can serve as a lifeline during downturns, and when times are better, they can provide the boost a business needs to reach the next level. This post provides some tips for maximizing your chances of obtaining one.
Tip 1: Boost Your Cash Flow
Lenders will almost certainly take a look at your business’s cash flow. Variations in cash flow from month to month are OK and even expected, but lenders feel much more comfortable extending lines of credit to businesses that can show they consistently have enough cash on hand to meet their obligations.
Tip 2: Have a Plan
Though a large part of the appeal of lines of credit lies in their flexibility, you should still be able to tell lenders what you plan to use the funds for. For instance, if you want to use the money to buy a new set of laptops, then be ready to tell the lender specific information about that purchase.
Tip 3: Mind Your Credit Score
Lenders place a huge amount of importance on credit scores. Obtain your personal and business credit reports and scan them for errors. If you notice any, have them fixed. Additionally, if there are any unremovable negative marks in your credit history, you may be able to soften the blow by writing a letter of explanation to the lender. And to raise your score over time, members of the Forbes Finance Council recommend making consistent, responsible use of credit and paying bills in a timely manner.
Tip 4: Request a Reasonable Amount
Finally, keep the amount of money you request reasonable. A good rule of thumb is to apply for a line of credit equal to no more than 20 percent of your business’s annual revenue.
If you’d like more strategies for navigating the world of business, take a look at Pendleton Commercial Financing’s other blog posts!