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WHAT IS A BUSINESS LINE OF CREDIT?

A business line of credit is a flexible business loan that allows you to borrow up to a certain amount, or credit limit, to cover short-term working capital requirements. When you get a business line of credit, the lender approves you to borrow up to a certain amount of money and you’re able to access some or all of that money as you need it. After you fully pay off a portion you’ve used, the full amount of your line of credit is available for you to use again. Although business lines of credit do operate very similarly to a credit card, they are not the same thing. Credit cards typically have higher interest rates and in many cases, a line of credit does not have a mandatory monthly payment system.

 

Flexible Financing For Your Business

Unlike a term loan, a business line of credit allows you to run your business without having to apply for a new loan every time you need a bit of extra cash. And with ongoing access to working capital, you can plan for and better manage your business’s future cash flow with less stress. Your line of credit can give you the boost you need to take advantage of opportunities when they arise. One of the main benefits to having a business a line of credit is that it’s revolving. That means you can access the credit line when you need it, pay down the balance, and use the line again as funds replenish. 

 

Secured LOC

A secured business line of credit requires a business to pledge assets as collateral to secure the line. Lenders typically ask for short-term assets, such as accounts receivable or inventory.

 

Unsecured LOC

An unsecured business line of credit does not require a business to pledge assets as collateral to secure the line. Lenders typically require the business owner to have a strong credit profile.

 

Startup Funding

Lines of credit can be an ideal funding solution for startups and pre-revenue business. Lenders typically require the business owner to have a strong credit profile.

Avg. Term Length: 3 - 24 months

Business Line of Credit Details

 

Qualifying Criteria:

Required Items:

  • 700+ credit score

  • Utilization below 30%

  • No recent bankruptcies

  • Signed one page funding application

  • 3-5 most recent business bank statements (standard)

  • Tri-merged credit report (startup)

  • 600+ credit score

  • 12+ months in business

  • $15,000+ average monthly bank deposits

Startup LOC

Standard LOC

No Collateral Requirements

 

Advantages

  • Only pay interest on the amount you  use, rather than the total amount funded

  • Lines of credit are flexible as long as you stay within your credit limit, making them an ideal solution for stabilizing cash flows and covering essential expenses

  • Great opportunity to build business credit

 

Disadvantages

  • It can be difficult to increase your credit limit

  • Lines of credit often have lower borrowing limits and fees and additional charges can add up if used irresponsibly 

  • Business lines of credit can be more difficult to qualify for than other financing options