Small business owners can find and qualify for many different business financing tools to gain access to the funds required to keep operations running smoothly. However, with multiple business loans and financing programs out there, you must determine which product is best for your business overall. One of your options is a business line of credit.
What is a Small Business Line of Credit?
Business credit lines work more like regular credit cards. Unlike a term loan, which provides a lump sum of cash upfront that is repaid over a fixed term, a business line of credit is much more flexible. For example, you can draw on a pool of funds as needed up to your credit limit.
Typically, this financing product has a principal amount with accruing interest. However, you are only responsible for paying interest on the current balance when your payments are due. In addition, rates and costs can vary depending on the borrower’s credit score and qualifications.
Online lenders and banks both offer ways to get business lines of credit. For example, Bank of America offers an unsecured business line of credit called Business Advantage. However, banks often have much stricter requirements, such as a minimum credit score. Alternatively, you can utilize an online lender, but these lenders usually charge higher rates for taking on greater risks.
If you’re interested in a business line of credit, AdvancePoint Capital can help. We’ve helped countless small business owners across the country get the funding options they need, whether it’s through credit lines or our various other business loans.
How Does a Business Line of Credit Work?
A business line of credit is a flexible solution that can help enterprises struggling with unforeseen challenges and unexpected expenses. Because lines of credit reflect the functionality of a regular credit card with their revolving line of credit, many small business owners can grasp the concept and get started quickly. Your lender will provide a certain amount of cash that is set by a specified credit limit — and you’re able to draw on that cash whenever you need it most.
Business lines of credit don’t have payments or interest rate increases until you actually draw on the funds. This way, you only need to pay for what you use. In addition, there are lines secured by collateral or unsecured lines of credit backed by a personal guarantee.
Compared to traditional loan options, lines of credit have much lower rates and closing costs. While business loan solutions can be an ideal choice for one-off purchases or investments, a business line of credit can be a great option for recurrent cash flow issues.
In addition, credit lines are renowned for their renewability. For example, your business can repeatedly draw out what’s needed, make the necessary payments, and draw more all over again. That’s something a loan can not do. The revolving credit this funding option offers is an excellent cushion for emergencies, working capital, seasonal expenses, operating costs, payroll, and so much more. An SMB like yours can benefit from the incredible flexibility of a revolving line of credit to meet your financing needs.
What Do I Need to Qualify for a Business Line of Credit?
The qualifications businesses need to meet will vary depending on various lenders. Still, time in business, the credit score of the business owner, business credit, and annual revenue all play a part in determining whether or not your company can get approved for a line of credit. However, the minimum qualifications typically are:
- At least six months in business
- A personal credit score above 600
- Business credit bureaus scores
- An average of $200,000 in annual revenue
These qualifying factors are far more lenient with online lenders than traditional outlets like banks. However, although online lenders have a more straightforward approval process with less documentation, you still need to provide some data to back up your statements.
Common documents and financial statements that a company may need to provide in order to qualify include, but are not limited to:
- Bank account statements
- Tax return
- Profit and loss
- Balance sheets
- Accounts payable and receivable
*Requirements vary depending on the bank, credit union, business lender, or funder.
Bank account, tax returns, and other necessary paperwork, in addition to your time in business, credit score, and annual revenue qualifications, will grant you access to funds that you can use to move your company forward. Revolving credit lines offer a lot of flexibility and freedom, providing your operation with the cash flow you need now.
What Is the Best Business Line of Credit?
Business lines of credit don’t necessarily have any term lengths, and instead of a lump sum of cash, you’re able to draw money up to the line of credit limit, paying it back indefinitely. The primary differences between a short-term and medium-term line of credit are the maximum funding amounts, minimum credit score requirements, qualifications, and possibly interest rates. Of course, your lender must deem you a responsible borrower before you’re approved for a small business line of credit.
There are essentially two types of lines you can receive from online lenders like AdvancePoint Capital. Both secured and unsecured business lines of credit offer a lot of flexibility that borrowers can take advantage of for their small businesses.
Secured vs. Unsecured Business Lines of Credit
Unsecured business credit lines are defined as those that can be obtained without personal collateral. What this means is, in the case of a default, the lender has no recourse to recover their losses by going after any of your pledged personal collateral. In contrast, a secured line of credit will include some type of collateral, such as real estate or accounts receivable.
An unsecured line of credit is just like a regular line of credit from a functional standpoint. It allows small business owners to access funds at any time and spend, repay it, and spend again on an ongoing basis, just like a revolving line of credit. In addition, unsecured revolving credit lines have principal and interest rates, and you are only responsible for the daily interest on your current balance. Renewal periods are offered either annually or semi-annually, depending on the lender.
Lenders offering unsecured lines of credit usually have shorter terms, a lower approval amount, and/or higher costs than secured lines to compensate for the lack of a personal guarantee. However, just because no personal collateral is required doesn’t mean that the business owner’s credit score is not important in a lender’s funding approval decision.
As a result, unsecured lines of credit have a few positives and negatives. The good news is that the application process is fast and easy, with funding decisions usually made in hours, not days. Now, you can gain access to funds quickly – and in some cases, one day! However, it’s crucial to note that speed is balanced by higher than those associated with a secured business line alternative.
How Do I Get the Best Business Line of Credit for My Business?
The answer is simple; all you have to do is work with the business funding experts at AdvancePoint Capital! Unlike your typical bank, our application process is simple so that you can gain access to funds in as little as one day. These institutions are far more sluggish with their line of credit operations, which may slow down the time it takes to get the funding you need.
Luckily, the AdvancePoint Capital marketplace is home to various lenders offering business lines of credit and other excellent loan options. Plus, we don’t require the piles of paperwork and financial statements you can expect from conventional lenders. With AdvancePoint Capital, it’s simple to apply and qualify from the comfort of your own home. What could be better than that?
What We Do At AdvancePoint Capital
At AdvancePoint Capital, we offer multiple financing programs so that we can find the one that works for your operation. Every company is unique, and we believe in providing a wide selection of funding options so that you can discover a solution that works for you. Here’s what terms and funding amounts might look like if you qualify:
|Credit Line Amount|
Flexible credit line amounts up to $250,000 available when you need it
|Revolving Line||Renewal semi-annually or annually|
|Payment||Repayment terms are daily or weekly|
Starting at 6.99% and up
Application: A simple one-page process that’s easy for everyone.
Required Documents: We review your business financial statements but focus on gross sales instead of profit/loss!
Credit History: All personal and business credit scores are considered from average to excellent.
Why Should I Choose a Small Business Line of Credit?
One word: flexibility! Business owners love to draw on funds whenever they need and only pay interest rates on the balance owed. In addition, it’s effortless to make your monthly payments, helping you manage your cash flow even better than ever before! You can use the funds in almost any way you want! Many popular uses for our business line of credit services include:
- On-demand access to money
- Instant working capital
- Funds to increase inventory
- Financing for emergency short term cash flow issues
Although business lines can be the perfect option for short-term cash flow issues and expenses, it’s essential to keep in mind that many lenders implement safety features with this funding product. For example, lenders can review your account quarterly, annually, or even when you make a withdrawal to verify your credit rating. Because of this, your credit limit can always change. However, this can also be a significant benefit because your credit limit can grow as your company grows, too.
The fast, convenient and straightforward way to get the money you need for your business – now!
Get Your Quote Today by filling out our simple form.
FAQ: Business Line of Credit
A line of credit is essentially an account that you’re able to draw funds from and pay back only what you take out, like a credit card. Because it’s a revolving line of credit, you’re able to reenact this cycle as many times as your lender allows, as long as you stay in good standing. In contrast, a business term loan typically has a repayment term — either every day or week until the business loan is entirely paid off.
It’s simple! If you receive a line of credit of $100,000 and you only draw $20,000, you only need to pay back what you’ve drawn out. The remaining $80,000 is there if you need it in the future, but you don’t need to make payments on funds you haven’t taken out yet.
Several factors could affect your interest rates, such as time in business, credit rating, requested credit line amount, and annual revenue.
You can use a line of credit for nearly anything you need. Whether it’s paying your bills, managing cash flow, unexpected business expenses, new inventory investments, or equipment purchases, the use of funds is unlimited.
Secured means that the business line of credit is secured with collateral such as property or a personal guarantee. An unsecured line of credit business financing does not require collateral but can have a personal guarantee. Businesses should expect a higher interest rate and lower credit limits without these things since the best rates and terms require security.
Not all banks prioritize providing business lines and small business loan options as it’s a high-risk enterprise. Most banks will require you to maintain a business bank account with them in order to apply for a credit line and have strict guidelines. However, you can always rely on alternative lenders or your local credit union to apply for a business line of credit.
The SBA not only provides business loans but also lines of credit through the CAPLines Program.
You can get a quote for a business line of credit by filling out AdvancePoint Capital’s easy and convenient quote form to get started today.
Get Started With AdvancePoint Capital
If you’re ready to take the next steps to get your small business the funding it needs, your first stop should be AdvancePoint Capital. We know what your business needs, and we will connect you with a vast network of lenders to find the best loan and financing options for your business. Gain instant access to working capital with a wide variety of funding products like a business line of credit. Contact us to receive your free online quote and start funding your small business today!