Securing a Line of Credit for Your Small Business
According to the Small Business Index that Wells Fargo released today, 39% of small business owners said it was “very or somewhat easy” to obtain a line of credit over the last year. Small businesses sometimes need all the financial help they can get, especially when they first get started.
So, just how easy is it to get a small business line of credit? Which credit option is ideal for your small business?
One of the easiest ways to get credit as a business owner is to open a business credit card. The card is linked to your business’s Employer Identification Number, available through the IRS, and gives you access to hundreds or potentially thousands of dollars to use for business expenses.
If you do not have any business credit, your personal credit score and history will be used to approve the business card application. Credit limits, interest rates, and other card terms will be based on your personal credit worthiness. Use the card strictly for business purchases, and pay it off as quickly as possible. This will build your business credit and open new lending opportunities for the future.
Aside from getting a business credit card, you also have the option of getting a small business loan. There are many types of business loans: secured loans that require collateral (your personal house, your business building if it doesn’t have a lien, your vehicle, etc.), unsecured loans that do not require collateral (typically only for people with excellent personal credit), short term loans (quick repayment schedules), Small Business Administration Loans, and more. You can get a loan through your bank or credit union, or you could work with an online lender like Kabbage.
If you handle a large number of transactions through PayPal, you could apply for PayPal Working Capital. PayPal will offer a loan based on your monthly transaction history, and then you can set up a payment plan based on the terms and interest rates that work best for you. The funds will automatically be taken from your PayPal account.
Square has a similar program known as Square Capital. Funds are deposited into your bank account in as little as one business day, and the loan amount is repaid daily with a small portion of your sales transactions.
Getting a small business line of credit doesn’t have to be a struggle. The more you work on your business credit history, the easier it is to apply for credit in the future. Only take out what you actually need, and repay your debts quickly to avoid excess interest.