How to Apply for Accounts Receivable Lines of Credit

Accounts receivable lines of credit are important for growing businesses looking for a customizable financing option. Banks who facilitate this funding determine the amount of credit based on your current level of receivables, or incoming funds from customers. You need to consider accounts receivable lines of credit when looking for a small financial boost for your small business.

Difficulty: Moderate

Instructions

Things You'll Need:

• Corporate financial statements
• Copies of business plan

Open an Accounts Receivable Line of Credit

1. Narrow your financing options by applying for pre-qualification at a financial institution. Your business can pre-qualify for an accounts receivable line of credit, which paves the way toward funding that matches your current financial situation. Check out NetBank's pre-qualification form to help you organize the materials you need to complete credit applications (see Resources below).

2. Find banks and lenders in your community that specialize in your particular industry. There are a number of accounts receivable lenders that focus on small businesses and high tech firms with narrow margins. These resources are good because they seek to educate owners and assist them financially.

3. Consider the clientele and resources of a lender before you apply for an accounts receivable line of credit. Local banks may provide personal service but national firms can take risks on new ventures and provide larger lines of credit. Ask your lending consultant for their company's financial and client portfolio.

4. Track your company's financial history back to the first day of business as you apply for credit. Most applications request a demonstration of your company's profits, accounts receivable information and current loans to determine credit worthiness. Overwhelm your consultant with information so that they have little doubt about your ability to repay your line of credit.

5. Create a five-year profit projection for your business when you apply for accounts receivable credit. Your current profits are important to determine the initial line of credit but as your business grows, you may need a higher credit limit. Modest profit projections will help lenders decide if you warrant a credit limit in excess of your requested amount.

Tips & Warnings

• Avoid the temptation to take the full offer from a credit line provider. Banks who notice a good credit rating and strong receivables figures will try to push higher credit lines on your business to receive higher interest payments. Figure out equipment, facility and personnel costs to determine the credit limit you should accept from a provider.

Who Can Help:

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