Business Line of Credit | Advance Funding Partners
Access to Funds as soon as you need them with a business line of credit
Getting a loan for your small business is often a good idea. Still, sometimes it would be nicer to have funds readily available as soon as you need them, without waiting for a loan. Sometimes, you may have a lot of smaller purchases that aren’t worth taking out a loan for every time. In such cases, you should consider applying for a small business line of credit.
Business Lines of Credit Explained
There are two classifications for business lines of credit:
- A secured business line of credit requires collateral to cover the loan if you cannot pay it back.
- An unsecured business line of credit does not require collateral but may still need a personal guarantee.
To qualify for a business line of credit, a lender will look at your business’s finances, credit score, and how long your company has been operating. A business will often have to be at least a couple of years old to qualify for a business line of credit. You will also need collateral to be eligible for a secured business line of credit.
Business lines of credits benefits:
A business line of credit is beneficial primarily for its flexibility. You can continue to draw funds from the line as you pay the money back without reapplying for a new loan, and the funds can be used for whatever you need. A business line of credit also tends to have lower interest and initial fees than a business loan, which will help build your business’s credit.
On the other hand, business lines of credit occasionally come with many additional fees that can add up over time, including withdrawal, maintenance, and inactivity fees. In addition, the application process for business lines of credit can often be complicated. If you’re not careful, the ability to continuously draw from the line of credit and only pay monthly minimums makes it very easy to borrow more than you can pay back. As a result, you could default on the loan.
A business line of credit is far less like a small business loan and much more similar to a business credit card. Rather than receiving a lump sum of money to spend, you are given a line of credit you can continuously draw from. You will only pay interest on the money you take out.
Best scenarios for a line of credit
Because of its flexibility, a business line of credit is ideal for various uses. It’s typically best when you need to spend a little extra money but don’t want to negatively impact your cash flow.
This includes situations like:
- Hiring new employees to handle increased business
- Opening a new office or handling an expansion
- Purchasing extra inventory to accommodate a busy holiday season
To apply for a business line of credit, find a lender you trust and wish to form a potentially long-lasting business relationship with and get all your documents in order. This mostly includes proof of financial stability for your business to demonstrate your ability to pay back any money borrowed.
If you think a business line of credit is right for your small business, don’t hesitate to contact us at Advance Funding Partners today. Apply with our simple and hassle-free application for a line of credit ranging from $5,000 to $1,000,000. We can help you get the funds you need to grow your business.
