How to Qualify for a Business Line of Credit
Lenders evaluate six core factors when underwriting a business line of credit. Here is what each one means, what the typical thresholds are, and how to strengthen your application before you apply.
Key qualification requirements
Time in Business
12 to 24 monthsMost mainstream lenders require at least 12 months of operating history. Fundbox is an exception at 3 months. Banks typically require 24 months. The longer your history, the better your terms.
Annual Revenue
$50,000 to $250,000/yrRevenue minimums vary from $30,000 (Fundbox) to $250,000 (National Funding). Lenders want to see consistent monthly deposits. Seasonal businesses should be prepared to show strong peak-period revenue.
Personal Credit Score
600 to 680+Your personal FICO score is checked for all business lines of credit because lenders typically require a personal guarantee. A score of 625 gets you access to most online lenders. A score above 680 opens bank products with better APRs.
Business Bank Statements
3 to 6 monthsLenders analyse your average daily balance, number of NSF events, and cash flow consistency. Maintain a positive average balance of at least $2,000 to $5,000 throughout the review period.
Business Legal Structure
LLC, Corp, or Sole ProprietorMost lenders accept all common business structures. LLCs and corporations are viewed slightly more favourably as they separate personal and business liability. Sole proprietors can still qualify but face slightly stricter underwriting.
Debt Service Coverage
1.25x or higherLenders check whether your business generates enough cash flow to service its existing debt obligations plus the new line payments. Existing loans, credit card balances, and leases are factored in.
Common reasons applications are declined
- xPersonal credit score below the lender's minimum threshold
- xBusiness less than 12 months old
- xAnnual revenue below the minimum requirement
- xToo many negative balance days in bank statements
- xExisting debt-to-income ratio too high
- xTax returns showing consistent net losses
- xRecent bankruptcies or tax liens
- xApplying to the wrong product for your profile
Steps to improve your approval odds
Review your personal credit report
Get your free report from AnnualCreditReport.com. Dispute any errors. Pay down revolving balances to below 30% utilisation. Avoid new hard inquiries in the 3 months before applying.
Increase your average bank balance
Lenders check average daily balance across the review period. If possible, hold 2 to 3 months of operating expenses in your business account before applying. Avoid overdrafts.
Establish business credit
Register for a Dun and Bradstreet DUNS number. Open a net-30 trade account with a supplier or vendor that reports to business credit bureaus. Pay all invoices on time.
Document your revenue clearly
Make sure all business income flows through your business bank account, not personal accounts. Prepare a simple profit and loss statement. File your most recent business tax return.
Reduce existing debt
Pay down credit card balances and close unused revolving accounts if they have annual fees. Reduce any outstanding merchant cash advances before applying, as these are red flags to lenders.
Apply to the right lender first
Match your profile to lender requirements before applying. Each hard inquiry costs 5 to 10 points off your credit score. Applying to Bluevine when you have only 10 months in business wastes an inquiry. Use our table to filter by minimum requirements.
Application checklist
Have these documents ready before you start any lender application to speed up the process.