Commercial Line of Credit

A commercial line of credit is extended for the purposes of doing business. There are many different types of businesses and reasons why this type of credit may be required, as well as many lenders and credit providers. In some cases, a business needs a line of credit so they can buy supplies and/or wholesale merchandise for their establishment. They may need credit for building renovations, advertising costs or for other reasons. For the purposes of obtaining merchandise or supplies, the credit is sometimes given directly from the supplier with a contract stating the business will repay the credit granted.

For example, let's say you are running a candle shop. Your duties as the owner might include making handmade candles, for which you would need supplies in bulk. You could possibly hook up with a supplier of wax, candle fragrances and colorings, molds and other candle making supplies who would finance the supplies you need to keep your shelves stocked with product. Or maybe you own a small clothing boutique and get a line of credit from an apparel wholesaler. There are many scenarios where this situation might apply and these are only examples.

You might decide you need a line of credit or a loan from a bank, credit union or even the Small Business Administration (SBA.) These funds could be for leasing or buying a building, paying utilities, buying merchandise, paying for advertising, paying employees, performing renovations or any other type of business related expense. If you are interested in exporting your products, the SBA has a special loan program especially for this purpose that helps small business owners export their merchandise to other countries. There are all kinds of options for business owners who need funding and organizations like the Small Business Administration encourage business owners to succeed.

Regardless of where you go to get a commercial line of credit, there are some documents and verifications you should have prior to applying. Every business should already have a business plan, even before it is launched. A business plan is a detailed document that outlines the purpose of the business, how it will be advertised, the target demographic, the costs to run the business, the profit projections and more. Business plans can be modified over time to suit the changing needs of business owners. You will also need verification of your income, credit and that you are the business owner.

When seeking a commercial line of credit from a bank or other lending institution, you may need to put up collateral to secure the loan, especially if the amount is substantial. Collateral is security for the lender which lowers their risk and makes them more likely to grant the loan. They are also going to look at how much debt you already have and your ability to repay any funds borrowed. After all the documentation is reviewed, the lender will decide how much credit can be extended to the owner of the business.

Sometimes, a commercial line of credit might be used to make a business bigger. Expansion may lead to more profits, which may be looked at favorably by the lender. It is almost impossible to start and run a business without some sort of financing, and lenders understand this. Even if you start off small, as many businesses do, as time goes on you may gain a loyal customer base and decide to expand your company. Business lenders can talk to you about all the different factors that come into play when applying for commercial loans, as it is important to understand your responsibilities as the borrower.