What Is a Business Line of Credit and How To Apply
If you are running a business, your top concern should always be making sure that you have enough money to operate. Without handling that important matter, other plans and strategies will simply not materialize. One excellent tool for protecting your cash flow and working capital is a business line of credit. This financing mechanism provides you with fast access to money when you need it.
What Is It?
A credit line is a type of financing arrangement in which the lender agrees to let the borrower take up to a certain amount (the credit limit). Although slightly different than a business LOC, a credit card works more or less the same way. You can use as much of the credit limit as you like. When you pay off some amount of your current balance, the available credit increases accordingly.
Unlike a credit card, however, a credit line does not require a card to use it. You can simply draw money into your business account and use it for a wide variety of needs. For example, you can use it to cover payroll, buy inventory, invest in a new marketing campaign or almost any other business expense.
What Are Interest Rates Like?
Compared to a traditional business loan, a line of credit will usually have a lower but variable rate. It will also likely have lower fees and closing costs.
The payments you may vary from month to month and will depend on the balance you currently have outstanding. There are minimum payments like a credit card. However, it is often advantageous to pay more than this whenever possible. Typically, business owners use credit lines to cover their short-term needs.
How Do You Apply?
Typically, applying for a credit line is very easy. Just get in touch with the lender you want to borrow from. A representative from the lender will help you submit an application.
In most cases, you will need to provide your business financial statements. However, some startup companies may be able to borrow on credit alone. You will receive a decision promptly and could be receiving funds within a matter of days.
Discover more about business lines of credit and how you could use one to accelerate your business’s success. This is something that almost every business should have. It is always better to apply before you need the money. That way, you will be ready for unexpected expenses or slow business.