Every day, entrepreneurs start businesses by using their personal savings, credit cards even loans from relatives. But once those sources are exhausted, a small business owner's next lender will probably be a bank. Union Bank's executive vice president of small business services, Barbara Hoose, has some pointers for those thinking about applying for a line of credit.

"Before you apply, you need to know your sales and your net profits. You also need to have a good idea of the value of your receivables and your inventory, as well as what your business owes people.

"It also helps if you keep a little bit of the profits in the company. Don't pull them all out as an individual. You also should make sure the information on your tax return matches what you're going to put down on your application. You'd be surprised how often that doesn't happen.

"With the Patriot Act, all of your documentation should have the same name for the same company. The law requires us to be absolutely sure who we are loaning to. The tax identification number for your business has to match the borrower. If it doesn't, that will cause a delay.

"If you as an individual have a decent credit score and your business has been paying its bills on time, and if you've made some money in your business, you have a reasonable chance of getting an ap-proved line of credit. But don't forget that you'll be guaranteeing the loan. You're on the hook for paying the loan back if the business doesn't.

"If this doesn't succeed, you may still qualify for an SBA loan, which allows the bank to take greater risks.

"After you get your first loan, if you have sales growth and you need more money for expansion, you may qualify for a larger line of credit. It's still a simple application for a line of credit up to $100,000.

"If you want more than $100,000, we do a more thorough financial analysis on the company. We're looking at your ability to pay it back, as well as your profits and your ability to cover hiccups in payments."

Case Study is a new feature in which experts offer advice on the various challenges that small-business owners often encounter. If you face an issue or challenge you think applies to others as well, please contact the Business Journal at casestudy@labusinessjournal.com .

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