What is a Business Line of Credit?
It is a financial tool used to fulfill short term working capital needs of a business. It works just like a credit card, the only difference is you get quick access to the cash which helps you balance the cash flow.
Who Qualifies for a Business Line of Credit?
A short-term line of credit is an apt funding option for start-ups, whereas a long-term line of credit is suitable for businesses with good credit score and solid financial history. You business’s earnings, credit score, and financial history are the determinants of the credit line amount and repayment terms.
- 500+ personal credit score
- 1-year-old business ownership
- No open bankruptcies
- Inventory Purchase
- Future Projects
- Daily Operations
- Upgraded Equipment
- Interest rates from 7-25%
- Approval in 24hrs
- Bad Credit is not an issue
- Interest applicable on drawn funds
- Loan from $5,000 to $1million
- Opportunity to improve credit score
- Loan terms – 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
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. An unsecured line of credit has quick approval time, higher interest rates and a longer loan term.
Business Line of Credit vs. Credit Card
Both, a business line of credit and a credit card are forms of revolving credit. The difference is: 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 comprehend all the facts and risks associated with it. Getting a business line of credit can be a wise decision if you need quick recovery from 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, and new investments as well as for unexpected situations.
Business Line of Credit
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