Krongkaew/Getty Images:Islustration by Issiah Davis/Bankrate
Typically, a business line of credit is a form of debt revolving that allows you to repeatedly withdraw from the credit line, unlike term loans. If necessary, you can provide funds up to certain limits. After that, if you still have a draw period, you can pay off your debt and borrow it later.
Lenders set maximum limits, but many credit lines allow you to borrow up to $500,000. The amount of credit approved depends on the size of the business, the year of the business, financial stability, credit score, and other risk factors.
Learn more about how to get a line of credit and how much you can borrow on the business line.
How much business line credit do you qualify for?
Some business lines range between $5,000 and $500,000, while some lenders have a higher limit of up to $5 million. Like term loans and credit cards, lenders assess whether you are low or high risk before deciding on the amount to make it available to you. You can’t use a full line of credit, but lenders will want to make sure they can pay it back if they do.
Your credit business line may also be protected or unsafe. A secure loan requires collateral to support a business loan, but there is no unsecured credit line. If you provide more collateral, you may be able to get more amounts.
Lenders want signs that your business is stable, profitable and therefore unlikely to default. In most cases, you set minimum requirements for revenue, credit score, and business time. Companies with higher credit scores and revenues are more likely to be approved for larger credit amounts.
Business Line by Lenders
If you are looking for a business line with a high credit limit, you should look into your lender. Credit limits vary widely depending on the lender you choose. Many bank lenders offer high credit amounts, but qualifying requires strong credit and business time. Wells Fargo, for example, offers a safe line of business that can reach up to $1 million. Bank of America’s credit line starts at $1,000, but there is no set-in-stone ceiling.
Online lenders, on the other hand, often limit their credit to between $250,000 and $500,000, but are more likely to accept inadequate credit startups and businesses. That said, if you want a higher credit limit, you can find them at a specific lender. Examples of credit amounts including online lenders:
How to increase your credit limit business line
Some lenders can increase the credit limits for existing business lines. To increase your credit limit:
- Requests an increase in credit lines: Use the online portal to request an increase or call your lender.
- Documentation provided: Lenders may want to see additional documents showing their financial situation, such as increased revenue.
- Waiting for approval: The entire process for approval can take several weeks, giving lenders time to verify your account.
Whether or not you qualify for an increase depends on several factors. First, did you meet the requirements of the original contract? Many lenders must meet certain benchmarks or adhere to rules regarding owner compensation and business liquidity. Meet these benchmarks and you may be more likely to increase your available credits well.
You can also consider the possibility of an increase in your credit line:
- Establish a positive repayment history with your lender and prove you can manage your credit line well
- Proves increased cash flow
- Proves an increase in annual income
- Provide additional collateral for your credit line
Business Line Alternatives
Business Line Credit is a good working capital finance option, but it may not be ideal for everyone. If you are unable to increase your credit line, or are looking for lower fees or longer repayment terms, these may be your best option.
- Business Credit Card: Designed for less business expenses, credit cards offer easy management of business purchases while offering perks such as cashback and rewards. It also helps you build business credits.
- Period loan: Companies that require capital for a larger, one-off investment may feel that term loans are the right option. It offers lump sum payments on fixed repayment terms and offers more predictability.
- SBA Loan: SBA loans provide long-term financing with higher loan amounts, lower interest rates and more generous terms, especially for startups and small businesses. These loans are supported by US Small Business Administrators.
- Grants: These funds do not need to be repaid and businesses can secure capital from a variety of sources without undertaking debts or other risks in financing for small and medium-sized enterprises.
Conclusion
Lenders offer a high line of credit of $5 million, but most small businesses do not qualify for this limit. The amount approved depends on you and your business qualifications. By providing ample collateral and coming to a table with a good range of personal and business credit scores, you can get better terms.
