Even as a new LLC, there are ways to improve your chances of getting a business line of credit. Here are some steps you can take to increase your likelihood of approval:
1. Prepare a strong business plan
Lenders want to see that you have a solid plan for your business. A well-thought-out business plan can demonstrate to lenders that you know where you’re going and have a clear path to profitability. Include detailed financial projections, cash flow plans, and explanations of how you intend to use the credit.
2. Provide collateral or a personal guarantee
In some cases, new LLCs may need to provide collateral to secure a business line of credit. Collateral can include assets such as equipment, real estate, or inventory. Alternatively, you might be asked to sign a personal guarantee. This means you’re personally responsible for repaying the credit if your business is unable to do so. Offering collateral or a personal guarantee can provide lenders with more confidence in your ability to repay the credit.
3. Build your business credit early
It may not be possible to build a strong business credit history right away, but starting early is key. As soon as you start your LLC, begin setting up your business credit profile. Open a business credit card, set up accounts with vendors that report payments, and maintain good financial habits. Building business credit will help you qualify for better financing options in the future.
4. Have a solid personal credit score
While lenders focus on your business’s financial health, they’ll still look at your personal credit score, especially if your LLC is new. A strong personal credit score will help lenders feel more comfortable with extending you credit. If your personal credit score is less-than-ideal, it might be worth working on improving it before applying for a line of credit.
