Understanding the Process of Small Business Lines of Credit

If you think that you cannot get funding for your business, then think again! Many new and small

businesses need only small amount of money to get moving or continue operation for things like

meeting payroll, upgrading a website or much needed technology.

Getting a line of credit would be a perfect solution for these challenges. But most of the times, when it

comes to ask for help, small business owners consider themselves out of the game without even trying.

A new small business credit lines could put you on the road to fluid cash and success sooner than you

think.

Small business credit line financing, also called an operating loan, provides a business with money to

cover day-to-day expenses. As funds are used, the established credit line is reduced. Once approved,

you can access your revolving line of credit with a quick phone call or provided checks.

In almost all the situations, you are going to need to provide a substantial amount of collateral for your

business line of credit. Common pieces of collateral include business property, personal real estate,

vehicles, inventory, accounts receivables, and the ongoing positive cash flow associated with your

business. If you are a business that is already in operation then you can expect that the interest rate

associated with your business credit lines will be significantly less than if you are a new business.

As an alternative to this type of financing, especially if you are starting a new business, you may want

to consider drawing a home equity line of credit against your personal residence. Of course, the risk

associated with this type of capital is extremely high. This is due to the fact that you are pledging the

value of your home as collateral for a new business venture. However, and as discussed before, you are

most certainly going to have to give a personal guarantee as it relates to your business line of credit.

When you are approaching a financial institution for this type of financing, you are going to need to

have a well developed business plan or business prospectus. In this document, you will need to provide

a loan amortization table, an anticipated profit and loss statement, cash flow analysis, balance sheet,

and business ratios page.

Additionally, most financial institutions will require you to submit at least three years of tax returns as

it relates to your personal income as well as the income that is produced by your business. Your

accountant or financial adviser can assist you with putting together the package that is necessary in

order to present it to the bank.