A Peek into a Business Line of Credit

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A business line of credit offers a wide range of funds to customers in order to draw money for their business when in need.

This type of business loan can be used for various business purposes, such as handling gaps in cash flow, getting additional working capital, purchasing inventory, or for addressing any other type of opportunity or emergency.

What is a Business Line of Credit?

A business line of credit refers to the flexible or revolving capital that imitates the procedure of a credit card. The only difference is that it gives you access to cash and you get the benefit of lower APRs in a few scenarios. Some of the key points related to a business line of credit are:

• Maximum loan amount: $10,000 to more than $1 million
• Interest rates: 7% to 25%
• Loan term: 6 months to 5 years
• Speed: Very quick, within 1 day

Eligibility

In order to qualify for a business line of credit, you need to fulfill the below-mentioned eligibility requirements. These include:

• Your business should be at least 6 months old
• You should earn more than $50,000 in annual revenue

Apart from these, there are other qualifications too for a business line of credit, which vary from one company to another. This information will be provided to you when you apply for a business line of credit.

A short-term business line of credit is best suited for young, less established companies. And, a medium-term business line of credit is ideal for companies that have a great financial history and good credit ratings.

The maximum amount of money, repayment terms, and initial credit line duration offered in a business line of credit depends on many factors, including the revenues, history, credit rating, etc. of the business.

Application

If you want to apply for a business line of credit, you can do so through a bank. This is the traditional way of getting a business line of credit.

However, if you don’t qualify for a traditional line of credit or if you want the loan quickly, then you can go for online lenders that provide this facility.

Make sure you opt for a reputable online lender so that you can be sure that you’re getting the best financial product and rates on it. The documents that are required for applying for a business line of credit include:

• Canceled business check
• Driver’s License
• Bank Statements
• Profit and Loss Statements
• Balance Sheet
• Credit Score
• Personal and Business Tax Returns

Pros
• The interest is paid only on the drawn funds
• You can avail the capital as and when required
• Can be used for a wide assortment of business purposes
• Great for building your credit score
• Accepts bad credit

Cons
• Lower credit scores necessitate higher rates
• Requires collateral sometimes
• Requires updated documents whenever the customer draws funds

Conclusion

A business line of credit is a flexible way to pull out capital whenever you require it. No matter if you are faced with an emergency or just want some extra capital to cover the cash flow gaps in your business, a business line of credit is your go-to option.