For a small business, lines of credit can be incredibly useful. Credit can allow you to invest in a new project, buy necessary equipment and keep a safety net for times of financial difficulty. However, like any type of financing, there are requirements. There are certain things that you may need to improve on before you can qualify for credit.

1. Time Spent in Business

While there isn’t much you can do for this particular requirement aside from waiting patiently, lenders may be hesitant to provide credit to a business that hasn’t been operating for very long. For some, you may not be able to qualify until you’ve been in business for a couple of years or more, but others may only require as little as six months.

2. Bad or Limited Credit History

Acquiring more credit can be difficult if you’ve struggled with it in the past. A low credit score can show that you’ve failed to make payments on time which can make you a risky investment for lenders. Boosting your credit before applying can help you get approved.

3. High Debt-to-Credit Ratio

If you already have a credit card or lines of credit but they are all close to their maximum spending limit, you may have a hard time getting more. Paying off some of your current debt will not only help improve your credit score but can also make it easier to qualify for additional credit.

4. Low Annual Revenue

Lenders want to know that you can pay off your debt. If you are not making enough money, then you may not always be able to make your payments on time. Each lender will have its requirements in this area, so try to find one that is compatible with your business.

5. Insufficient Collateral

Especially if you are having trouble meeting other requirements, lenders may want you to provide collateral to get a line of credit. This can include equipment, real estate, accounts receivable, and other property. The amount and type of collateral required can vary between lenders.

There are many ways that your business can use lines of credit, and this type of flexible financing can be beneficial. Before applying, it can be helpful to work on various aspects of your business to increase your chances of being approved. However, terms will differ between lenders, so look for one that best suits the needs of your business as well as your ability to meet their requirements.