Getting an Unsecured Business Line of Credit
Going out and getting a line of credit makes sense when you start to grow your business. There are a lot of options available out there, but one of the most popular is to get an unsecured business line of credit. Unsecured credit lines allow you the freedom to plan ahead and ease cash flow situations that can arise from time to time within your business. Here are some tips on what to avoid when you go to open an unsecured line of credit:The Paperwork Crunch
Like a lot of firms, Advance Funds Network publishes its minimum standards for people who are expecting to get a line of credit. The key thing to avoid, therefore, is not meeting those standards—or having the paperwork that allows you to show that you meet those standards before you apply. On the other hand, if you are uncertain whether you are qualified based on the minimums that are set, be sure to contact them to discuss it because they may have a different program that qualifies you.Too Low of a Credit Score
Your business credit score is normally established by the frequency and timeliness of the payments that you make to your vendors and employees. If there are no lapses and you have some history, you will likely have no problem qualifying. If you don’t know your credit score, you can easily access it online. One of the important things that you will need is to establish a Dun and Bradstreet number so that they can track your history for you. If it works out that your score is lower than what Advance Funds Network advertises as a minimum, then feel free to contact them and ask whether or not programs will be available for you.A Low Number of Checks
Some accounts that companies open for you do not allow you the freedom to do what you need to with your money. Advance Funds Network lines of credit provide you with up to 5 drafts over a four-month period, giving you the ability to write checks when you require them.Companies That Specialize in an Industry You Are Not In
Generalists sometimes take heat for not specializing in a particular area. When it comes to business financing, one of the strengths of a company like Advance Funds Network is that they are generalists. They do a great job of working in every industry from restaurants to construction to high-tech. The experience of their staff makes your financing seamless and easy to complete.Application or Upfront Loan Fees
While there are many loan programs for both normal credit level companies, there are oftentimes not so many options available for companies that end up having lower or bad credit scores that do not involve an upfront or application fee. These fees sometimes end up being in the hundreds of dollars and must be paid when the account is opened. At Advance Funds Network, regardless of credit, they have plans available that will allow you to open the account and use it without having to pay any upfront fees.Frequently Asked Questions
What common mistakes should I avoid when applying for an unsecured business line of credit?
When applying for an unsecured business line of credit, it’s crucial to avoid several common mistakes. First, not having a comprehensive business plan can hinder your approval chances, as lenders want to see a clear strategy for using the funds. Second, failing to organize financial records can lead to delays or denials, as accurate documentation is essential for assessing creditworthiness. Lastly, ignoring your credit score can be detrimental; understanding and improving your credit profile increases the likelihood of favorable terms.
How can a low credit score impact my application for an unsecured business line of credit?
A low credit score can significantly affect your ability to secure an unsecured business line of credit. Lenders often view low scores as indicators of financial risk, which may result in higher interest rates or even denial of credit. It’s essential to assess and improve your credit profile before applying to enhance your chances of approval.
Why is it important to avoid leaving the same outstanding balance on a business line of credit for extended periods?
Maintaining the same outstanding balance on a business line of credit for over six months can signal to lenders that the credit line is being used for long-term financing rather than short-term needs. This misuse may prompt lenders to convert the line of credit into a term loan, potentially altering repayment terms and affecting your financial flexibility. Regularly drawing and repaying within shorter cycles demonstrates proper utilization of the credit line.
How can failing to assess my company's financial situation lead to mistakes when obtaining unsecured business lines of credit?
Neglecting to thoroughly assess your company’s financial health before seeking an unsecured business line of credit can result in borrowing more than necessary or accepting unfavorable terms. A detailed evaluation helps determine the appropriate credit amount and ensures that the additional capital aligns with your business’s capacity to repay, thereby supporting sustainable growth.
