A Business Line of Credit is a financial tool to compensate for the short-term financial crisis. It gives you access to revolving cash flow, and the flexibility to withdraw the cash whenever you need. Once you have repaid the withdrawn amount, your credit will set back to the previous amount. Besides Banks and Union Credits, due to the accelerated small businesses and financial crisis alternative lenders are offering Business Lines of Credit to help owners with business expansions and inventory expenditures.
So, if you hate the meticulous loan application and approval process, we advise to save yourself the trouble of re-applying and apply for Business Lines of Credit (LOC). With an unsecured line of credit, you can even build your business and personal credit score.
$5,000 to $1 Million
Types of Lines of Credit
The line of Credit (LOC) is an inexpensive funding solution for short-term capital needs as compared to a personal loan or credit card. There are two types of LOC: Secured and Unsecured.
It is based on collateral such as your business assets and real estate. 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. For example, an unsecured line of credit has quick approval time, higher interest rates and a longer loan term.
Would you be comfortable risking your home or valuables in the time of crisis? Alternative lenders don’t want to risk their money hence, unsecured business loans come with higher rates. Established businesses have enough capital to pay higher interest rates but starts up have to choose between offering collateral or higher interest rates.
Are you eligible for a Line of Credit?
Have a 500+ personal credit score? Running a business for more than a year? Not facing any bankruptcies?
If you have crossed off all three of the above-mentioned conditions, you are eligible for a small business line of credit.
The loan range and loan term is dependent on your annual revenue, credit score, financial standing and credit card history.
Your chances of approval are handsome and brighter if you fulfill the following criteria:
• You can get your desired loan amount if your time in business exceeds one year.
• With a fair credit score, more than 630, your chances of loan approval are stellar.
• Generating over $ 180K annual revenue gives a guarantee to your potential lender.
Bid farewell to the traditional loan approval process, and apply for a Business Line of Credit.
Applying for a loan via traditional lenders and Credit Bank Unions can be extremely time consuming and cognitively straining. Merchant Advisors provide Business Line of Credit with simpler application terms, flexible payment terms and fast approval rate.
The wait for a loan approval by traditional lenders is unsettling. Expenses and financial crisis don’t wait for anyone so if you need fast funding on flexible terms, apply for a line of credit. Once you have been approved for the loan, you can withdraw as much money as it is required keeping the borrowed loan range in mind. You pay interest only on the withdrawn amount.
With our simple terms, consistent cash flow and revolving credit you can get rid of protruding financial problems.
With our simple terms, consistent cash flow and revolving credit you can get rid of protruding financial problems.
At Merchant Advisors, we don’t believe in discrimination, as business owners with low and poor credit scores are welcome. But we would highly appreciate you show the following documents to your lender so we can have a glimpse at your credibility.
• Business & Personal Tax Returns
• Balance Sheet
• Driver's License
• Credit Score
• Bank Statements
• Profit & Loss Statements
Diving deep in the mechanics of Business Lines of Credit
Mishaps whilst running and managing a business are inevitable! There is always a way out of any financial crisis, especially with infinite financing options.
A small business line of credit is our way out of any financial insecurity, let’s dissect into LOC so you will come to a final decision with a clearer mind.
How does a business line of credit (revolving credit) works?
In layman terms, line of credit works like a personal credit card, the only difference is credit card has higher interest rate and APR value, as a borrower you will get the funds till a set credit limit by your bank, credit union or alternative lender.
You pay interest only on the money that you have withdrawn – its most appealing advantage.
If the lender has lent you $20,000 but you only need $5,000, you have the liberty to withdraw the amount you need from your bank account. LOC saves you from taking out more loan than you need and later on consuming it on unnecessary projects.
Once approved for a loan, the potential lender will issue a ‘draw period’ – a timeline in which you can draw money, usually it lasts for a couple of years depending on your lender’s criteria. Small business owners open a business checking account to administer the transactions. For this, the bank will issue specific debit or credit cards. The interest starts to accumulate once you have taken out the cash.
To keep the credit revolving, make small payments on time so once you ran out of the loan it can be available to you again.
A hypothetical example to understand Lines of Credit
Let’s say due to a couple of ill decisions you have landed yourself in financial jeopardy. You apply for an unsecured line of credit and are approved for $100,000. At the moment you only require $50,000, Lines of Credit allows you to withdraw the amount you need, not the whole lent amount. Now that you have utilized half of the loan, interest in applicable on the used amount.
With the flexible terms of Line of Credit, you can withdraw the remaining amount, make complete payments and get the lenders-approved money back into your account.
What good will a Business Line of Credit will bring to my business?
The dream of every small business owner is to see their business grow and earn more profit every year, and small business line of credit can act as a bridge between lack of funds and unavoidable expenses such as payroll and inventory purchase.
LOC can help cover up small-term business needs, even if you are oblivious to the exact amount of required loan, the flexible terms of Line of Credit can help eliminate the factor of risk.
So, if you need funds for inventory purchase, to invest in future projects, to carry out daily operations, or to remodeling, you can take aid from business lines of credit.
Improve your credit score by using a Line of Credit.
Since you are applying for a loan you must know the importance of fair and good credit score. Most alternative and traditional lenders demand a fixed figure as a credit score.
Once you get approved to a LOC, this account will appear as the new account in your credit report. And if you have not withdrawn a considerable amount, the utilization rate would be lower and this s improve your credit score.
Carefully draw the funds, keeping in mind the utilization rate and current credit score.
Positive and Negative aspects of A Business Line of Credit
With lines of credit funds are available 24/7 and you can withdraw funds as you desire but you have to show your documents whenever you withdraw. So, this can be annoying at times.
Lines of Credit is a remarkable opportunity to improve credit score and bad credit scores are welcome to apply but you have to pay collateral and face higher interest rates.
Lines of Credit vs. Business Credit Cards
Although the basic functioning between these two is the same, there are some considerable differences between the two.
Credit cards have higher interest rates and a number of fees as compared to the business line of credit. The amount of loan varies as well, lines of credit offer more money.
Moreover, business credit card requires collateral and unsecured Lines of Credit saves you the trouble of proving any collateral. Keep your goals in mind and apply for a business line of credit.
Revolving Line of Credit vs. Non-revolving Line of Credit
It is self-explanatory from the title itself. Revolving credit gives you access to funds, again, once you have repaid the amount. On the other hand, you are unable to reuse the funds from the non-revolving line of credit but it comes with low interest and APR rate.
So, pick the one that suits your business needs.
Business Lines of Credit vs. Installment Loans
Business LOC works as a revolving credit meaning you can take as much money as you want to fulfill your financial need by keeping the limit in mind. The main objective behind LOC is to cover short-term financial problems like home improvements or products and services, whereas an installment loan is recommended for massive expenses and long-term means.
Plus, installment loans are less flexible as compared to Lines of Credit, giving you a limited room to play in.
Business Lines of Credit vs. SBA Loan
Although the loan range, availability, and interest rate are on the same level, there is a major difference between the two. SBA Loans are government approved hence they follow a tedious approval and funding process unlike the line of credit. The major difference being the unavailability of the revolving credit.
Have a clear picture regarding the needs and financial obstacles your business is facing so you can choose the one that satisfies your needs the best.
Somethings to consider before applying for a Business Line of Credit
Before stepping in the whole ceremony of business loans ask yourself why you need the loan. It is unwise to apply for a credit line to get rid of previous debt, for this will become a never-ending cycle.
Try to highlight the underlying issue so that you can use the funds to drive your business in the right direction.
An expert’s advice can go a long way, contact our financial experts so that you can pick and choose with ease.
Are Lines of Credit always the best options?
Unsecured Business Line of Credit is expensive business funding option, one needs to make repayments on time and failure to do so will result in a huge dip in the credit card.
So, if your business is not generating enough profit and you are having trouble sustaining the payment terms, maybe secured business line of credit is the better option for you.
In addition to this, don’t jump in without considering all of the options. If LOC’s rates are higher than your grasp, be patient, a more suited option are right around the corner.
When is the good time to utilize a Line of Credit?
If everyday expenses are pending such as payroll, equipment upgrading, and inventory purchase, the revolving credit from small business loans can help you carry out circadian tasks.
In addition to this, if you need money to pay off any previous debt, the funds from the cash flow can help. It is recommended to invest money in new projects to ensure the possibility of an increase in annual revenue and profits.
So basically lines of credit work perfectly well for the business owners who are unsure regarding the exact time of money withdrawal. You can handle the money on your terms.
But if there is any discrepancy in the payments then you will be responsible for the downfall of your credit score.
Merchant Advisors will help you make a sound decision by keeping all of the factors in mind.
Why choose Merchant Advisors for Business Lines of Credit?
We've learned a lot by working with thousands of small business owners like yourself. With Merchant Advisors, you not only get capital for your business, but also get credit resources, affordable prices, renewal benefits, early repayment savings and, best of all, a peace of mind.
To get started, fill out a 3 step online loan application, enter your business information, and you will get a decision in a matter of an hour and funding in 24 hours.
Building a solid credit profile is important to gain access to funds at reasonable rates. We help you with your credit by reporting it to the credit bureaus.
You will get an email, immediately, mentioning the current status of your loan. Our expert financial advisors will reach out to you; they work with business owners every day to address emerging financial challenges while running a small business.
We offer discounted fees on loan renewals and low prices exclusively on small business loans for our loyal customers. We are always ready to help now, or anytime in the future.