Line of credit, also known as revolving credit, works a lot like a credit card. The owner of the credit is given access to a variety of funds, and they can grow capital whenever they need to. You are only supposed to pay interest on the amount you take out and use. Once it’s back, your line of credit returns to the original amount. The owner of the credit line can borrow in increments, repay it, and barrow again if the line of credit is open. This is a great facility for business owners who need extra money for expansion, production, buying equipment, repairs, etc.
If you already have a line of credit, and you are enjoying its benefits. But you want to increase the amount of cash you can borrow; you will have to increase your line of credit. There are several techniques for doing this; some of them are mentioned below. Follow these tips to boost your credit line.
- Build Your Personal and Business Credit
If you have previously taken out a loan in the past, then you are aware that lenders review your credit score along with your loan application. According to experts, a credit score is one of the most important things that matter to your loan application process. When one is seeking financial funds for their business, the lender considers an applicant’s personal budgeting habits when making their decision. If the lender confirms a borrower’s personal finances are in order, then the lender will know the borrowed funds will be spent wisely. Additionally, your personal credit score plays a vital role in acquiring more capital.
- Exhibit Yourself as a Top-Notch Borrower
What a lender wants to look in a borrower is the responsibility of ever paying back in time. If you have always repaid the draws on your credit line in full and on time, then it will be easy for the lender to trust you. A good borrowing history is necessary for boosting your line of credit. But one should know that making a good account of repayments takes time, so be patient with it. Most lenders want to see a good history of at least six months, to increase the line of credit. So be consistent with your payments, repay your draws on credit line in time, and build a steady record.
- Boost Your Financial Capacity
Lenders may boost your line of credit for several reasons, including:
- The lender sees that your business’s finances have improved
- The business has brought in more revenue
- There is a strong flow of money
A strong best small business line of credit proves to the lender you are a trustworthy borrower. The reason is, an increase in the financial capacity shows that you have more capital, meaning you can pay back your drawn money in time along with interest. Also, an increased credit line makes it necessary to have more collateral. So, if you have more collateral to offer, then you are suitable for having an increased line of credit. You can check with the bank if you qualify for this or not, by filling a few forms and submitting them to the concerned authority.
- Build a Good Social Media Presence for your Business
Many business owners take this advice lightly and feel that it does not have any impact on your credit line. The truth is quite the opposite of this belief; today, social media plays a significant role in the world of business. And, if your company has a good presence there, then it can turn out to be a positive thing for you. When a lender sees that you have a large social media following, they will feel your business is worth an investment. Ultimately, it will help in increasing your line of credit.
- Pay Off Your Expenses
It very common for business owners to have a line of credit and debts from other business loans at the same time. But very few are aware that existing debts can harm your credit line. This is because when lenders see that you haven’t paid back your debts, they will find you untrustworthy and irresponsible. Whereas, if you go to a lender to ask for a bigger credit line, and you have recently paid off your debt, then you will most likely qualify. Paying off your expenses exhibits that you can repay the money in full and on time, and you are eligible for a bigger credit line. Although be aware of prepayment penalties, some lenders charge a pricey fee when you pay your loan earlier than required.
These are a few ways that can help you in increasing your existing line of credit. What matters the most is having a reliable and successful business and exhibiting yourself as a trustworthy borrower. Remember, increasing your line of credit takes time, so make sure to maintain a good credit history and being on time with your bills.
I am Arjun Kumar. I am the owner and administrator of Finance Gradeup. I have completed my education in Arts & Technology. Arjun Kumar usually has interests in playing games, reading and writing. He was a brilliant student during his college days. He also works for many private companies, but the main interest of Arjun Kumar is digital marketing. He thinks that reading is a must before providing any quality information to his readers. You can find Arjun Kumar on much social media handles online, or you can learn more about him in about us page.