Business lines of credit are perfect for short-term funding. They operate more like credit cards than business loans, and are traditionally unsecured lines of credit that allow you to withdraw cash when you need it, as you need it.
Because it’s an unsecured line of credit (it doesn’t require collateral for approval) the application process requires the submission of business records, financial statements, and bank statements. On certain occasions, your personal credit score and history may be needed for the application process.
Lines of credit come with varying interest rates (between 7%-25%) are available for amounts between $10,000 and $100,000. Amounts exceeding $100,000 require a secure line of credit (collateral) and business owners are often advised to consider a business loan for more favorable repayment options.
Like credit cards, lines of credit feature revolving credit. While you may have access to $50,000, if you only need $10,000 at the time, you would only pay interest on the amount borrowed. As you repay the amount owed, the balance of the line of credit replenishes, giving you the option to reuse the money as you see fit. This allows for great flexibility within businesses because you have complete control over how the money is spent and how much is borrowed at any given time. The money can be used to cover operational costs, inventory, assist with cash flow or even participate in business opportunities.
Business lines of credit keep you in charge and in control of your business since you don’t have to sell company equity in order to temporarily increase your cash flow. This allows you to build your business ow you’ve always dreamed of and without the interference of investors.
Take full advantage of the opportunity business lines of credit have to offer—even if that means starting small and increasing your limit over time. Lines of credit allow you the opportunity to build your business’ credit in order to help with larger loans or financing needs that you may need later in the future.