Business Line of Credit- A Beginner’s Guide for Instant Approval
Are you a savvy business owner, urgently seeking a business line of credit?😏
Or you’re looking to secure a line of credit (LOC) because you understand the importance of staying ahead of the competition….
The significance of maintaining a positive cash flow💰💰💰 or in desperate need of inventory. Regardless of the reason, keep reading because within this guide…➰
I’m going to break down everything you’d need to know to get an instant business line of credit, from the comfort of your own home!
The content within this post is from personal experience and research. This info is provided for informational purposes only and is not intended to constitute legal or financial advice. Please seek professional advice from a certified tax professional and/or financial advice from your mortgage lender.
**Affiliate links may be included within this post.
What is an Instant Business Line of Credit?
Business Line of Credit Pros and Cons
Can you use your EIN to acquire a LOC?
How to Know the Right Time to Borrow?
Why are Clear Goals for Borrowing Required?
What you should know before Applying
Should you only Borrow what you Need?
Small Business Loan vs. Business Lines of Credit
Without further ado…
What is an Instant Business Line of Credit?
An instant business line of credit is a loan that can be applied for and approved within hours. It’s designed to help solve businesses’ immediate needs, such as cash flow, equipment purchases, working capital, and more.
Most other traditional types of business credit can take months. With our fast-paced economy and unforeseen challenges, it’s a good idea to keep a reserve. A business line of credit gives small business owners (SBOs) peace of mind, knowing that when challenges or opportunities arise, they can be quickly addressed.
Business lines of credit have a 73% approval rate. Click To Tweet
That brings us to….
Business Line of Credit Pros and Cons
There’s nothing perfect in this world including business lines of credit. Unfortunately, there are products and institutions that are only interested in what’s in it for them.
Always do your homework, to find the best solution for you!
- Less expensive than a traditional loan
- Cash receive instantaneously
- Only pay for portions used
- Provide peace of mind
- Creates a safety net
- Give you flexibility
- Builds business credit
- Higher interest rate
- Lower limits (usually)
- More expensive
- Potentially hidden fees
- Creates excessive spending temptations
- Requires business discipline
Auto and equipment loans have an 80% approval rate. Click To Tweet
That leads me here……
Can I Use my EIN to Acquire a Business Line of Credit?
First, if you are unfamiliar with an EIN number (employer’s identification number), it’s a number that’s assigned to you by the IRS. It’s a simpler and safer method the government created to identify small businesses without using social security numbers. And it helps protect you by limiting your ssn# exposure.
To achieve this, it’s simple, easy, and free.
How to apply for your EIN
Step #1. Go to IRS. Gov
Step#2 Follow the instructions
Step# 3. Save, copy, or print your number..
***Note you must have an SSN, ITIN, or EIN to apply
Must live in the U.S. or territories of the U.S.
But to answer your question: Yes, you can and should use your EIN for business credit. However, many lending institutions request you use your SSN.
…Why… they can arrest your personal assets if you default on the loan.
Catch -22, if you’re new in business, it’s great to start off establishing your business credit. Try using your EIN for everything. This way you are building business credit.
What usually happens most startups use their SSN. Hence, only building creditworthiness under their SSN, not their EIN.
So, there is no activity on their business credit.
***Pro Tip: A business credit line provides a safety net for unexpected expenses, helping you prevent high-priced short-term loans.
These strategies will help~
How to Know When is the Right Time to Borrow?
There are no right answers.
The adage is true, the best time to borrow money is when you don’t need it. It’s especially true if you’re planning to acquire a line of credit. Similar to selling a business…the best time is to sell…
…is in the grow phrase when profits are up, and you are growing and blowing.
The name of the game is to be proactive and not reactive. When you’re broke and desperate lenders can smell it.
Another old saying, a broke salesman stinks!🛀🛀
Signs to when it’s time to borrow:
- When there are more sales than inventory
- When money is cheap
- When you have nothing to lose
- When there is a fool-proof opportunity
- When there’s a fire-sale
- When a favorable asset comes available
- When you can borrow and repay the loan
That leads us to this….
Have Clear Goals for Business Loans
Acquiring a business loan or LOC (line of credit) is step 1, being responsible for the money is step2, and repayment is step 3….
Before putting on your go-too business suit or if you shop online as I do… smear on your favorite lipstick (I always apply lipstick to conduct business, even online👄) know the purpose.
Because your lender will ask “how you are planning to use the money” Their #1 concern is what’s the likelihood of repayment.
…Are you not a good steward of money…?
… did you squander your profits…
Do you know how to run a business? …
In the above paragraph, we noted the lender’s number one concerns… listed are a few of the most acceptable answers.
This will help put you in the driver’s seat.
This should help…
- To ramp up marketing
- Inventory purchase
- Upgrade technology
- Modernize facilities
- Hire super talent
- Update equipment
- Enhance product line
- Business expansion
What is not acceptable!!!
- I’m broke, I need money
- Overdue taxes
- Saw a new opportunity
- I’ve exhausted all my resources
- Money is cheaper right now
The average small business bank loan amount is $633,000. Click To Tweet
Tips For Getting a Small Business Loan
Do your homework. Make a proper assessment of what and why a loan is needed. The more prepared you are the better your chances. Here’s where that dreadful business plan ends up worth your time and effort. Forward a copy of your well-written business plan. This makes it easier for the lender to follow and understand your vision.
If your vision is in your head only, it makes it harder and unclear for the lender to comprehend. Addedly, it demonstrates a lack of business savvy and protocol.
Be mindful that the lender is forking over a lot of dough. Their only worry is repayment. They expect a return on their money. That’s the only way they can stay in business!
Having the answers to the 5 C’s will improve your chances of approval.
Depending on the kind of loan you may need to know the answers to the questions below, top of mind.
These are typical points of interest for most bankers. Be as prepared as possible.
Collateral- what you own they can confiscate in the case of default
Cash flow- how does your cash flow and how well is it managed?
Credit score – of course, the higher the better
Category of business- what’s your trade, some businesses are at higher risk than others
Character- of the business owner… are they creditworthy, do they talk or act shady?
Should you borrow more than needed
Yes and No. Yes, if you have a game plan and you are 99% sure it will work. Nothing is absolute, but at least you have a plan. No, if you’re just hoping, wishing, and praying your new idea will work!
Borrowing money can be easy…. repayment can be a monster.
…. On the other hand, there’s a thin line between borrowing too much and borrowing not enough. If you borrow too much depending on the loan type, you will either end up paying back more, hence losing money.
Unless it’s a line of credit… in that case….
…No harm because you only pay interest on the money spent.
If you borrow too less, you’re back in the same predicament, or even worse, because now you’ve added another line to your expense account.
***Pro Tip: A LOC is also known as revolving credit. You can re-borrow after the debt is paid off.
That Brings Us To…
Line of Credit vs an Unsecure loan
A line of credit is a predetermined amount of money borrowed without collateral. Additionally, there isn’t a set monthly payment. The downside is the interest is usually higher. Check the fine print for excessive fees and other advertising charges.
Unsecured loan. Is a loan that requires no collateral. However, from month one there is a set monthly payment. Regardless of the amount used. So basically, you’re paying for the money you hadn’t utilized.
…..The interest is less than a LOC
29% of small businesses fail because they run out of capital. (Fundera) Click To Tweet
Instant lines of credit make it easy for businesses that need immediate cash, to get the money they need to fuel growth.
Although the name is a misnomer, it’s usually not instant, however, there are services that offer approval within hours. Without a doubt, quicker than traditional loan products.
Getting your hands on funds precisely when it’s needed can be a huge win for business owners. You never want to miss an opportunity because of the lack of resources.
As small business owners, we find it harder to qualify through traditional banking. Most fintech companies offer instant financing solutions. There are more alternative credit solutions even for very small businesses, including those with low credit scores.
Keep in mind the lower the score usually the higher the rate. Meaning you’re paying more for the money. Regardless of the type of loan, do your due diligence before signing on the dotted line.
Now it’s time to hear from you.
Is a revolving line of credit a good fit for your business?
Which pointers did you find the most helpful?
Please leave a comment in the comment section.
Don’t forget to share this post~
Most Viewed Post
Within this article, I’m going to show you how to improve your business website pageviews. Addedly, you’ll see how I use these exact tactics to grow my website pageviews...
Search Engine Optimization, what is it, and how does it work? 🤔🤔🤔Addedly you may also be wondering why SEO is important for your business or if SEO marketing is all that it's cracked up to...