What is a Business Line of Credit?
A business line of credit provides you working capital to fulfill a whole lot of business needs. Draw on your business line of credit to get more working capital, purchase inventory, manage seasonal cash flow gaps, pay off other debts, or cope with almost another business opportunity or emergency.
Who Qualifies for Business Lines of Credit?
Young and even less established businesses might be able to meet the criteria for short-term lines of credit, while mid-term lines of credit are more for businesses with good credit and a solid financial background.
Qualifying Requirements For A Line Of Credit
The first component to consider is that qualifying for a line of credit is not simple and easy. Lenders have various standards that you and your small business must meet as a way to qualify. The bottom line is that banks lend cash primarily based on the 3 C’s: cash flow, collateral, and credit score. You and your business should have all three Cs.
The maximum available funding amount, preliminary term of the credit line and the repayment terms count on your business’ revenues, credit rating, credit background, and some other elements.
How A Business Line Of Credit Can Help With Cash Flow?
Let’s say it is time to pay the bills and other payments; however you are still waiting to acquire payment from your customers—making it difficult for you to pay what you owe.
Unfortunately, it is not the first time this has happened. You determine that having a financial cushion of some amount—for instance, let’s say $25,000—would help save you this trouble in the future. So you go to an online lender and apply to open a business line of credit of up to $25,000.
What Will A Business Line Of Credit Cost You?
The primary cost of a business line of credit is as simple and easy as you take and pay. In contrast to a conventional term loan, that is one big payment with standard repayments, with a line of credit you will only pay interest on the cash you get.
How To Use A Line Of Credit?
A business line of credit is a funding solution that allows a small business to draw as much as a set amount of cash. To acquire funds, you only request to draw from the line. You can pay back the line at any given time, which will boost the chances of your funds availability. Most easy revolving lines of credit function just like a traditional credit card operates.
Lenders limit how you can use the business line of credit. Obviously, considering the fact that it is a commercial line, it can be used only for commercial business purposes. Businesses use these lines of credit to cover short-term requirements that include covering payrolls, paying suppliers, and managing other business expenses.
The charges of using a credit line differ and normally based on the size of credit line and the risk. The fee related to financing is paid on the outstanding balance. It is also variable and attached to the prime rate. Moreover, the lines can additionally have other charges including maintenance costs and availability charges. Those expenses vary lender by lender.
Finally, many banks require that your business repay the overall balance of the line sometimes. This practice often referred to as resting the line, is something to take into account if you are thinking about this type of funding product.
Line Of Credit Qualifications And Pricing
- Companies in business at least 1 year
- $100,000+ in gross annual revenue
- A majority owner with a 600+ personal credit score
What Are The Rates?
- 99% – 39.9% APR
- Your line amount and rate will be based on our assessment of your business along with your business and personal credit
How Do I Pay Back?
- Fixed weekly payments
- Automatically deducted from your business bank account, so you don’t have to worry about missing due dates
Are There Any Fees?
- $20 monthly maintenance fee, which is waived for 6 months if you draw $5,000 or more in the first five days of opening your account
- There are no fees to draw money