Here are a few examples of scenarios where your business may benefit from a business line of credit: If you run a startup that hasn’t been in business for two years or doesn’t have a strong credit profile, you may not qualify for the best terms. If you made a personal guarantee, you’ll also risk your personal assets being seized if you can’t pay the loan.ĭepending on what type of financing you qualify for, you may end up paying higher interest rates. If you don’t budget in that monthly payment, you may struggle to pay it, which puts you at risk of defaulting on the loan.
Just like with any financing, you’ll have to pay it back. A line of credit lets you get the cash you need when you need it rather than paying interest on money you won’t need for a while. You might need $50,000 now, $7,000 in six months, and another $12,000 next year. Let’s say you’re renovating your commercial space. Likewise, you can get the working capital you need to pay the bills during a slow period.įor many businesses, their financing needs aren’t adequately met with a large lump sum. If you have the opportunity to, for example, expand your business, a line of credit affords you the opportunity to take advantage of it. Compare Now Pros and Cons of Business Line of CreditĪ line of credit can give you access to capital when you need it, but there are drawbacks to consider as well. Create an account to find opportunities you’re most likely to qualify for fast. Use Nav to instantly compare your best options based on your unique business data. Online lenders, on the other hand, often typically offer short-term lines of credit that fully amortize (or must be paid back) over a shorter time period, often 6-24 months.įinding funding doesn’t have to feel like an uphill climb. After that, the business owner may enter a repayment period during which the outstanding balance must be repaid over a specific period of time. With some lines of credit (especially those from traditional banks), there may be a draw period during which you can access funds and make interest-only payments. There will be a specified repayment period, but payments will vary depending on the amount borrowed. For any line of credit you consider, you need to carefully read the terms offered to make sure you understand any fees that may be charged.
In addition, there may be an origination fee, annual fee and/or a monthly maintenance fee if you don’t use your line of credit. Some lenders charge a draw fee every time you access the credit line. Variable interest rates typically change when interest rates in the economy change. Interest is typically only charged for the amount of the credit line that is accessed, and interest rates may be fixed or variable. With a line of credit, the business owner decides when, if, and how they will use that borrowed capital. It allows you to access funds from your credit line, pay back some or all of it, and access it again. You’re familiar with a line of credit if you use a credit card. It may also be referred to as a revolving line of credit.
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How to qualify for a business line of credit.Pros and cons of business lines of credit.How does a business line of credit work?.In this article, we’ll cover several aspects of a business line of credit, including: Rather than receiving a fixed amount of financing like you would with a loan, a line of credit gives you access to a certain amount of money, which you can borrow from, repay, and borrow from again. What is a Business Line of Credit?Ī small business line of credit can help small business owners maintain consistent access to funds to smooth out the ebb and flow of changes in business expenses and revenues. A business credit line is a flexible, often low-cost way, to get short-term financing to cover working capital needs. You may be thinking: “My business is profitable, we don’t need to borrow.” But many businesses with and without cash flow issues keep a line of credit handy for unexpected growth or expansion opportunities.
With all the options available it might be hard to choose the right line of credit, but we can match you to the line of credit best suited to meet your needs.
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