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Line of credit for small business

Line of credit for small business

A line of credit for small business - what is it and why should you consider this kind of financing. Well, one word comes to mind - flexibility. Gett

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A line of credit for small business – what is it and why should you consider this kind of financing. Well, one word comes to mind – flexibility. Getting a line of credit for your business gives you access to funds that you can use whenever your company needs a boost in financing and pretty much for whatever reason like a credit card.

Having a line of credit for your business lets you withdraw the business funds that you need when you need them and you only pay interest on what you borrow.

This is the Swiss Army knife of small business financing.

Getting a line of credit for your small business might be the perfect financial solution. You see; the bottom line is you have a revolving pool of capital at your disposal.

In terms of business lines of credit – there are two types of business lines of credit. We have secured and unsecured lines of credit.

Secured vs unsecured line of credit for small business

Secured business lines of credit require businesses to provide collateral to secure financing. The collateral typically is an asset that the lender can take ownership of and liquidate to pay off the remaining balance in the event of a default.

Unsecured business credit can be obtained without the small business owner providing any collateral. This means if the company defaults on the financing, the lender would have no pledged securities to use to recoup any losses.

That sounds risky and it is, but lenders of unsecured credit protect themselves by other means including providing lower credit limits; charging higher business line of credit rates; shortening the repayment period and requiring a personal guarantee commitment.

Now you might ask “should I get a business loan or a line of credit?” Well, business lines of credit give you the capacity to handle emergencies and opportunities – equally offering the peace of mind and security you need to manage your business cash flow best.

If flexible financing fits your company’s needs, consider applying for a business line of credit online with an alternative lender or through a bank. 

Conventional lenders typically require a strong revenue and at least a few years of history.

On the other hand, online lenders tend to have looser qualification requirements. Because of that, rates are often higher, terms shorter and credit limits lower.

Online lenders are also known for their speed. In many cases, it’s possible to apply for and receive funds in a 24 to 48 hour-window.

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