For many businesses, a loan is difficult to obtain. One good alternative is to get a line of credit. Credit cards are usually easier to get than loans – especially if you really don’t need very much. Similarly to a loan, a small business line of credit is subject to a review and annual renewal, which is usually revolving. Similarly to other types of credit cards, a line of credit for small businesses has interest that begins to accumulate once you draw funds. As you begin to pay down the balance, the amount you pay (with the exception of interest) begins available again for you to borrow.
Just like a regular credit card, the lender sets a limit on the amount of funding your business may borrow. The number one reason to consider this option is to gain access to short-term funding. Most small businesses use the funds to help finance operational expenses such as the ability to increase inventory or buying supplies. There are cyclical businesses that rely on a small business line of credit to assist with off-season working capital.
A significant portion of businesses (around half) have experienced cash flow problems, and a line of credit can really be a helpful lifeline to help you get through difficult times. If you can get an unsecured business credit card, you won’t have to use it towards a specific purpose necessarily, unlike with a business loan, that often requires an outlined proposal on how the money will be used. The interest rate for the credit card is variable. For greater amounts of $100,000 or more, you might be required to put up security such as a CoD or a blanket lien on your assets.
Small Business Line of Credit Research for Institutions
Before applying, you’re obviously going to need to carefully research to find out a lender’s requirements. Some banks will require that a business has been under current ownership for at least two years. If your company is newer than that, you might have to apply personally, which means your individual credit score needs to be over 650 in order to get decent terms.
There are many advantages of getting a line of credit for a small business and keeping it in good standing by making payments on time. Not only will you be able to keep your business finances running smoothly, you’ll be establishing a business credit rating and increasing your chances of getting more financing in the future, which result in being able to expand your business.
The best place to start your search for a small business line of credit and other funding options is US Business Funding. It’s a reputable company that offers financing solutions to both growing and establish companies across all industries.