What is a Business Line of Credit?
A business line of credit is a financial instrument used to fulfill short term working capital needs of a business. A business line of credit functions like a credit card, but the only difference is you get access to quick cash which is used to even out your cash flow.
Who Qualifies for Business Lines of Credit?
A short term line of credit is a suitable funding option for startups, whereas a long term line of credit is suitable for businesses that have a good credit score and solid financial history. The maximum credit line amount and repayment terms rely on a business’s earnings, credit score, financial history, and other metrics.
- 500+ personal credit score required
- Minimum of 1 year of business ownership
- No open bankruptcies
- Inventory Purchase
- Future Project Costs
- Cover Operating Expenses
- New Equipment
- Only pay interest on funds drawn
- Build your credit score
- Bad credit is not a problem
- Interest Rates - 7 to 25%
- Loan Amount from $5,000 to $1m
- Same day approvals
- Loan Term - 6 months to 5 years
- Business & Personal Tax Returns
- Balance Sheet
- Driver's License
- Credit Score
- Bank Statements
- Profit & Loss Statements
Types of Lines of Credit
A business line of credit is an inexpensive funding solution for short term capital needs as compared to a personal loan or a credit card. There are basically two types of lines of credit: secured and unsecured.
A secured line of credit is based on collateral like business assets or real estate you own. A secured line of credit has a lower interest rate and better terms because it’s less risky.
An unsecured LOC doesn’t require collateral or a personal guarantee. An unsecured line of credit has quick approval time, higher interest rates and little loan term.
Business Line of Credit vs. Credit Card
How does a business line of credit differ from a credit card? A business line of credit and a credit card are both forms of a revolving credit. The difference between lines of credit and credit cards is that credit cards usually have higher interest rates, charge extra fees for cash advances and require monthly payments.
Read The Fine Print Carefully
Before applying for a business credit line, it is important to understand all the facts and risks associated with it. Getting a business line of credit can be an intelligent decision if you need quick recovery from a financial hardship, or to take advantage of a new opportunity.
How Can a Business Line of Credit Help You?
Renewability is what makes a business line of credit a valuable funding solution for small businesses. You can redraw the funds after paying the earlier funds. A line of credit can be used to finance your ongoing operations, fill cash flow gaps, leverage new opportunities, and provide a cushion against any crisis. Because of the flexibility, a line of credit can also be used for seasonal expenses, large purchases, new investments as well as for unexpected situations.
Business Line of Credit
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