BusinessLOC.com - Resources for Business Lines of Credit and Business LOCs

Home

Resources

Qualifying



	How do you qualify for a Business LOC

	Once you have decided that you a business line of credit is right for your business, how do you know if your business will meet the underwriting standards of a typical lender? Will you qualify? Every lender is different, but to qualify for a business line of credit, most business owners should be meet these guidelines: Owner Credit Score in the 500+ range In business more than 1 year, preferably 2 No business or personal bankruptcies Owner Personal Guarantee What will you need to provide to the business funding provider? The following items are typically included in the documentation you provide to the funder to form your Underwriting Package. This list is similar to the types of documentation you would provide to qualify for a mortgage. And just like applying for a mortgage or home equity line of credit, you will need to provide explanation for any missing items and any clarifying comments to aid underwriters. From the Business: Application (completely filled out and signed) Last two fiscal year end (FYE) financial statements Last two years tax returns (or copy of extension filing) Most recent interim financial statements Projection, if losses are present Contracts, if applicable and material From the Majority Owner(s): Current personal financial statements Last two years tax returns (or copy of extension filing) Questions you might be asked Be prepared to answer these typical pre-screening questions posed by the underwriter: Are you aware of any adverse situations that may have negatively affected your personal credit score, including real estate deals where bank action is imminent? If bank or other financing is currently in place, will our proposed financing be sufficient to replace or satisfy the current lender? Are you about to book a substantial amount of new business or lose a major account? Any major contracts coming on or expiring? Has your company been experiencing any undue pressure from any creditors? Are any suppliers wanting past due payments, withholding product, restricting trade terms, or placing you on COD, etc? Are any large payments due any creditors over the next 6 – 12 months? If so, inquire further. Collateral requirements Depending on the collateral requirements for the business line of credit, you may also be asked to provide: Customer list – include exact corporate name and street address Funder may require purchase of accounts free of liens or other claims Most recent A/R aging (detail aging) Sales journal Most recent A/P aging (common date with A/R aging) Independent appraisals