Determining How Much You Can Borrow Through a Business LOC
This is one of the most often asked questions among business owners. The amount you can borrow through a business line of credit depends on many factors. These include:
How much is your business currently earning?
Are you currently in business?
If so, how long have you been in business?
How much tangible collateral do you have to offer?
What is your current credit score?
How much money do you truly need to borrow through a business LOC?
Most importantly it is important for you to determine the amount of collateral that you can pledge for a business line of credit. As we have discussed numerous times, banks and finance companies are not in the business of taking risk. These institutions are in the business of earning an interest rate spread. They take in deposits with the intent to loan against collateral (such as real property or equipment) with the intent to generate a profit. This is why unsecured business lines of credit (such as credit cards) carry a much higher interest rate than secured lines of credit (such as a home equity line of credit secured by a personal residence).
When determining how much you can truly borrow through a business LOC, you need to look at your overall income (including your spouse’s income if he/she is involved or owns a part of the business) as well as the tangible collateral you own personally and through your business. With the current difficult lending environment at hand, a bank will now always look at your tangible collateral when determining how much credit to extend to you and your business. This is especially true for small business or startup businesses that do not have an extensive credit or operating history.
If you do not have an extensive operating or credit history for your business then you may want to use personal credit cards secured in your name in order to finance your business venture. Again, this is an expensive form of credit, but it can help you significantly in the long run for building a strong credit history for your business.
Business LOC is a specially designed website for entrepreneurs that are seeking to raise capital for their startups, small businesses, and expanding existing businesses. The focus of the site is on Business Lines of Credit.
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