How Long Should a Business Be in Place before Applying for Lines of Credit?

October 19, 2022
How Long Should a Business Be in Place before Applying for Lines of Credit?

According to the U.S. Small Business Administration (NSBA), 27% of businesses report an inability to receive the funding they need to effectively grow their business. One of the best ways to fund a small business is by securing a business line of credit, which can be used for a wider range of expenses than a traditional loan. For example, the best business line of credit for new business growth could provide extra cash flow to meet seasonal fluctuations in business or cover unexpected, short-term expenses. 

What Are the Different Types of Business Lines of Credit?

Depending on your business needs, there are a few different categories of business lines of credit:

  • Secured vs. Unsecured: The primary difference between these two types is that an ​​unsecured business line of credit for new business does not require collateral while a secured one does.

  • Revolving vs Non-Revolving: A non-revolving line of credit functions as a sort of “lump sum” (which doesn’t necessarily have to be the maximum amount you’re allowed to borrow). This means you apply for a set amount, receive it, and pay it off. With a revolving line of credit, the amount you’re originally approved for replenishes as you pay it back.

Is It Hard to Get a Line of Credit for New Business?

It doesn’t have to be, provided you find the right lender to work with. Generally speaking, small business line of credit requirements include how long you’ve been in business and how much revenue your business generates. These requirements vary by lender and are meant to help them determine how likely it is that you’ll be able to pay off the loan.

So, Exactly How Long Do You Need to Be in Business to Get a Line of Credit?

The short answer is, it depends! Factors such as the lender you choose, the amount of risk they perceive (and are willing to take on), and the amount of risk they’re willing to take on are each likely to play a role in whether you’re approved for a line of credit.

For brand-new businesses, many lenders expect—or outright require—two or more years of operations, as well as consistent revenue and a healthy financial picture. Factors such as your credit score may have an impact on your timeline, as well. In some instances, an excellent credit score (800 or above) can reassure a lender that you’re likely to follow through on paying off their line of credit, even without being in business for two years or more.

Getting a small business line of credit with Backd is the fastest and easiest way to fund your business, providing instant access to revolving credit with unlimited terms and unbeatable rates. What do you need for a business credit line through Backd? Our terms are simple and straightforward. In addition to a FICO credit score of 600 or better, we just expect your business to:

  • Be based in the United States.

  • Have been in operation for at least one year.

  • Make at least $25,000 in monthly revenue or $300,000 in annual revenue.

How to Get a Line of Credit for a New Business [5 Steps]

Applying for a business line of credit is easy!

  • Step 1: Determine how much money you want to borrow. Try to be as accurate as possible here. Just because you can borrow up to a certain limit doesn’t mean that’s going to be the best option. An added benefit is that with a revolving line of credit, you can always re-borrow the original amount as additional needs arise.

  • Step 2: Evaluate your financial situation to ensure you meet the basic line of credit requirements.

  • Step 3: Find a lender you trust and who is willing to provide terms you can accept. With Backd, you can borrow from $10k to $750k with reasonable rates and terms. 

  • Step 4: Prepare your application materials. Included among the documents needed for a business line of credit application are tax returns, financial statements, and your business plan.

  • Step 5: Submit the application and wait for approval. When you submit your application to Backd, you can rest assured knowing that your credit score won’t be affected, your information will be protected, and approval is obligation-free. And once we’ve approved your application, you can expect to have a funding decision as soon as the very same day!

Explore Backd’s Business Line of Credit Options

No matter where you are in the process of exploring your options for securing a business line of credit that best meets your needs, Backd is a great place to start. For instant access to revolving credit with competitive terms and great rates, explore your options or start your application 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