How Do New Businesses Get Credit?

by Backd Business Funding
October 3, 2022
How Do New Businesses Get Credit?

Alternative business funding like a line of credit is a great way for businesses to pay for essential operational costs and have access to funding when it's needed the most. Are you asking, “Can a startup get a line of credit?” The answer is yes!

In this case, you’ll want to secure the best business line of credit for new business owners, especially when you’re in need of financial security for a short period of time.

What Is a Business Credit Line?

A business line of credit is a flexible, alternative funding solution for businesses that provides a revolving form of financial support. Just as with a business credit card, once you pay off the amount you’ve drawn, it becomes available again for use. By contrast, a regular loan or working capital is only distributed as a single lump sum. Using a line of credit means that interest will only be charged on what you’ve used, rather than what you haven’t yet paid—or a large sum like a loan. The funds that are spent then accrue interest, often at a variable rate.

Typically businesses use lines of credit for expenses such as operational expenses like supplies, payroll, or for increasing inventory.

How Long Do You Have to be in Business to Get a Business Line of Credit?

Most often lenders require businesses to be operational for at least one or two years to secure funding. This proves whether or not your business is profitable and sustainable. One of the main reasons for a minimum length of time being in business is due to the financial documentation needed to prove that your business can repay what you borrow. 

What are small business line of credit requirements and how do you get started securing funding as soon as possible?

How Much Money Can You Get with a Business Line of Credit?

Depending on the provider, you can get anywhere from $10K to $750K. Typical financial requirements that impact the amount of funding your receive include:

  • Minimum FICO score

  • Minimum annual revenue

  • Tax returns

  • Economic ratios

  • Business checking account

Most lenders use these to not only review your business’s eligibility for funding but also to determine the amount you’ll have access to. 

How Do New Businesses Get a Line of Credit?

As a business owner looking for funding, you should follow these steps to secure a line of credit:

  1. Determine Your Funding Needs

  2. Confirm Your Eligibility

  3. Decide on a Provider

  4. Collect Required Documentation

  5. Submit Your Application

1. Determine Your Funding Needs

Knowing your company's financial requirements will allow you to seek financing within your budget. It will also help you organize your budget so that money is distributed wisely. You don't want to overspend and then find yourself unable to repay the loan. However, it’s possible to receive a higher line of credit for access to funds in case of an emergency, but you should never spend more than you can repay within the terms. Understanding the maximum amount of funding you need will help you decide on a lender later in the process. 

2. Confirm Your Eligibility

Your credit history, revenue, and number of years in business must all be taken into account in order to be approved for a business line of credit. If you have at least one to two years of work experience, a credit score of 600 or above, and incoming money, you'll be more likely to be approved. Generally, it might be more difficult to qualify for a line of credit from a traditional lender like a bank or credit union, which could require things like collateral to approve your business credit. 

3. Decide on a Provider

To choose the lender that is the greatest fit for your company, you need to do some research on the lenders that are available and fulfill your needs based on the goals and eligibility you’ve already established. Additionally, you don't want to engage with a lender who is unsupportive or has disadvantages like excessive interest rates. 

4. Collect Required Documentation

Although various lenders will want different information, you should plan to provide most, if not all, of the following documentation for a line of credit:

  • Articles of incorporation

  • Proof of collateral

  • Credit reports

  • Bank statements (revenue, incoming cash flow, and expenses)

  • Financial statements (balance sheets and profit and loss statements)

  • Tax returns (at least three years of personal and/or business returns)

Make sure you are prepared with these materials before you submit your application. These must be provided in order to be considered for funding.

5. Submit Your Application

After completing all of the preparation, you’re ready to apply! With Backd, you’ll receive an answer within 24 hours of submission.

How Do I Get Business Credit Right Away?

At Backd, you can receive anywhere from $10K–&750K with 6–12 month terms as long as you have a 600+ FICO score and a minimum of $300,000 yearly revenue. You can receive a decision on your line of credit approval within 24 hours of submission after a quick application process and no hard credit pulls. Using the dashboard, you may access your funds and track your draws and payments at any time. If you’re looking to cover your short-term needs with a line of credit, visit our website to apply today.

What would you do with the right amount of capital?

Working Capital Advance

Easy payment structures offer amounts with fast turnaround, Simple and easy process to access working capital.

  • Flexible - no collateral required
  • $10K - $2M
  • Terms up to 16 months
  • Automatic daily or weekly, or semi-monthly payments

Business Line of Credit

Get instant access to revolving credit with unlimited terms, and the best rates for your business.

  • Draw funds anytime
  • $10K - $750K
  • Unlimited terms, incredible rates
  • Soft credit pull that doesn't affect your credit score