Many businesses owners run into cash flow at different intervals. There may be certain seasons where credit demands exceed profits or profits haven’t been collected yet. Regardless of the reasons for these cash flow deficits, there may be a need to acquire business credit to maintain the demands of your business during these seasonal lulls. Business credit can help you to maintain inventory, pay bills, and meet emergency needs if they arise. New businesses often run into this issue. Cash flow is a consistent need of any business to meet the ongoing needs of your business and run it optimally.

Acquiring a Business Line of Credit

Most banks won’t extend a line of credit to new business owners or startups because often there’s simply not enough history or proof of potential performance. In simple words, the bank needs to know that you can repay the funds that you borrow. Businesses must produce evidence to prove this. Fortunately, many banks will offer new start-ups a secured line of credit which creates some security for the lender. This is often referred to as a personal guarantee. A personal guarantee can be backed by several different things including a home mortgage. Normally, an unsecured line of credit requires a business to provide financial documents that show proof of profit and evidence of standard accounting practices. However, newer businesses may have these documents but fall short when it comes to providing a history of profit.

Partnerships and Corporations with Multiple Principles

Businesses that are partnerships or corporations and have more than one principle will more than likely require a collateralized loan that combines all of the principles to be approved for a line of credit.  Newer business owners will also be required to produce pro format balance sheets and income statements as well. Older, more established businesses may not be required to produce this document.

As a business owner, cash flow issues can be a common occurrence. However, business credit can be a beneficial way to handle temporary issues with cash flow. Most banks won’t extend credit to start-ups and newer businesses without some form of a personal guarantee. A well-established business may be able to obtain an unsecured business credit line. 

Signal Peak provides unsecured lines of credit to new and established businesses of all types. Contact our offices today to get the capital you need.