Qualifying for a Revolving Credit Line with Bad Credit

Getting a revolving credit line with bad credit is near impossible to do.  Lenders are tightening their lending standard and making it more difficult for borrowers to take on debt.  Borrowers with good credit ratings are having difficulties entering into debt arrangements, such as lines of credit.  This situation is even more difficult for a borrower with a bad credit rating.

What Is a Revolving Credit Line?

A revolving credit line is a continuous line of credit that goes up and down as it is used and paid back. A credit card is an example of revolving debt. The borrower has a set limit on the amount of credit that they have access. As the credit is used, the amount of credit available is reduced. When the amount used is paid back, credit is restored, up to its set limit.

How Businesses Use Revolving Credit Line

Businesses use revolving credit lines as a way to find short-term needs. Payroll, operational expenses and other costs that need to be paid on time can be dealt with a by having access to a revolving credit line. Businesses are heavily dependent upon this form of lending. A business with bad credit will find it near impossible to survive without access to a constant line to cash in order to meet their financial needs.

Use a Cosigner to Obtain a Revolving Credit Line

A business in need of a revolving credit line that has bad credit will need to obtain a qualified cosigner for the loan. This may be a business or trading partner, or parent or subsidiary company with a very good credit score. This is one way in which a business with bad credit can qualify for a revolving credit line. The cosigner will act as a guarantor for the loan and provide the business with access to the credit line it needs to finance its business activities.

Use a Collateral or Secured Account

Some lenders may permit the use of a collateral or secured account in order to qualify a business with bad credit for a revolving credit line. This gives the lender assurance that if the business is unable to pay back the credit line, a pledged asset can be used to repay the obligation. Use of a collateralized account could pose cash flow or liquidity problems for the business. This is especially true of businesses that have bad credit and are in dire need of the revolving line of credit.

Borrowers with bad credit will find it difficult to access lending opportunities at the same rate as borrowers with good credit.