When it comes to cash management tools, there is no replacement for a good credit line. While there are a lot of ways to set up your cash flow so it is easy to meet your obligations even when your own incoming payments are delayed, few of them are as versatile as business lines of credit. If you have never applied for a credit line before, it might seem daunting, but accessing one is actually fairly easy for most small companies.

Income, Assets, and Credit

The most important consideration that any lender makes when approving a revolving credit instrument is whether or not the borrower has the income to repay the debt. This is as true for business credit lines as it is for personal ones. When considering your income, the lender also looks at your outstanding debt via a credit report. This allows for an accurate calculation of your debt-to-income ratio, which in turn helps the lender decide how much credit to extend.

Most business lines of credit are secured with a real estate asset to keep interest costs down, which can help if you are worried about whether your income alone is enough to qualify you for a credit line. The ability to sell the collateral to recoup the debt also means your credit line can be approved for more than an unsecured line for your company. The exact limit is dictated by the asset’s value and your lender’s LTV requirements.

Credit Scores and Credit Lines

Your credit report is more than just a list of your outstanding debts and their payment status. It is also a running score that tells lenders how well you have done with your ongoing debts. Lower scores indicate late payment or even default. Some lenders disqualify scores that are less than good because of this, but most private lenders simply adjust the cost of the credit line to reflect the risk indicated by a borrower’s credit score, provided there are no loan defaults on the report.

If you are unsure whether your company has a credit score because it is relatively new, there is nothing to worry about. Most lenders offering lines of credit for businesses wind up considering the owner’s personal credit score in cases where there is no established business credit score. Sometimes you can even use a personal real estate asset as the basis for the credit line, which can help if your company does not own any property yet.