Running a small business is hard work and sometimes requires a bit of help through small business loans or business financing. You’ll find an array of lending options out there that you might qualify for, but it’s essential to understand which products are specifically geared to provide the help your business needs now. One of the most outstanding options available to help you access funds to cover business expenses is a small business line of credit.

What Is a Small Business Line of Credit?

A business line of credit can help businesses struggling with unforeseen challenges. Unlike a term loan with a fixed repayment period that provides a lump sum upfront, lines of credit are much more flexible. Business credit lines work similarly to a regular business credit card. You receive a pool of funds that acts as a revolving line of credit, meaning you can draw on that pool as needed up to a specific limit.

This product typically accrues principal and interest, but you are only responsible for paying the interest on the current balance upon your payment due dates. Rates and costs will vary depending on a borrower’s credit and qualifications.

What Is a Small Business Line of Credit?

A business line of credit can help businesses struggling with unforeseen challenges. Unlike a term loan with a fixed repayment period that provides a lump sum upfront, lines of credit are much more flexible. Business credit lines work similarly to a regular business credit card. You receive a pool of funds that acts as a revolving line of credit, meaning you can draw on that pool as needed up to a specific limit.

This product typically accrues principal and interest, but you are only responsible for paying the interest on the current balance upon your payment due dates. Rates and costs will vary depending on a borrower’s credit and qualifications.

 

Benefits of a Business Line of Credit

Low Rates

Compared to traditional loan options, lines of credit have much lower rates and closing costs.

Solves Cash Flow Issues

While other 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.

Renewable

It’s also renowned for its renewability. Your company can repeatedly draw out the funds you need, make the necessary payments, and then draw more money out all over again. That’s something a loan can not do.

Many Great Uses

It’s an excellent cushion for emergencies, working capital, seasonal expenses, operating expenses, payroll, and more.

Easy to Understand

Your lender will provide access to a certain amount of cash with a specified credit limit. Then, you’re able to draw on that cash whenever your business needs it most! Since lines of credit reflect credit cards, many small business owners can grasp the concept and get started quickly.

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How Does a Business Line of Credit Work?

A business line of credit is a flexible solution that can help businesses struggling with unforeseen challenges. Because these lines of credit reflect that of credit cards, many small business owners are able to grasp the concept and get started quickly. The lender will provide access to 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 for your company.
Business lines of credit don’t have payments or interest rate increases until you actually draw on the funds. So, you only need to pay for what you actually use. Business lines of credit can also come secured (financed by collateral) or unsecured (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.
It’s renowned for its renewability, in which a company can repeatedly draw out what they need, make the necessary payments, and draw more all over again. That’s something a loan can not do. It’s a great cushion for emergency situations, working capital, seasonal expenses, operating expenses, payroll, and more. An SMB like yours can benefit from the incredible flexibility and revolving nature of a business line of credit to meet your financing needs.

Qualifying for a Business Line of Credit

Like other small business loans and financing products, the qualifications for a business credit line can depend on unique lender requirements. Typically, you’ll need to meet the following qualifications for approval:

  • At least six months in business
  • A personal credit score above 600
  • Business credit bureaus scores
  • An average of $200,000 in annual revenue

Time in business, the personal credit score of the business owner, business credit, and annual revenue all play a part in determining whether or not your organization can get approved for a line of credit. However, qualifying factors for online lenders are far more lenient than traditional outlets like banks.

Best Business Line of Credit Options

There are essentially two types of business lines of credit that you can receive from online lenders. Both short-term and medium-term business lines of credit offer a lot of flexibility for borrowers.

Business lines of credit don’t necessarily have any term lengths, as it’s a revolving line of credit. You’re able to draw money up to the credit limit and pay it back indefinitely. However, this is, of course, only possible if the lender deems you a responsible borrower who makes the necessary payments on time. Applying for a secured business line of credit with personal collateral can affect your credit score.

The only real differences between a short-term and medium-term line of credit are the minimum qualifications, the maximum loan amount, and the potential interest rates. Medium-term lines typically have a lower interest rate than short-term business lines of credit.

Unsecured Business Line of Credit

Unsecured lines of credit are defined as those that can be obtained without personal collateral. That means, in the event you default, your lender does not have recourse to recover losses by going after any pledged personal collateral.

An unsecured line of credit is just like a regular one from a functional standpoint. The rates are principal and interest, and you are only responsible for the daily interest on your current balance. Unsecured business lines of credit usually have a renewal period either annually or semi-annually, depending on the lender.

Business lenders providing unsecured options usually have shorter terms, a lower approval rate, or higher costs than a secured line to compensate for the lack of a personal guarantee. As a result, an unsecured business line of credit has its positives and its negatives.

An example of an unsecured business line of credit is the Business Advantage Credit Line offered by Bank of America. To qualify for the Business Advantage line, you need two years in business and $200,000 in annual revenue. However, the applications are subject to close at any time.

The good news with unsecured credit lines is that, without a personal guarantee, applying won’t affect your credit score. However, it’s important to note that just because there is no personal collateral doesn’t mean that the business owner’s credit score is not an essential factor in the approval decision for lenders. In addition, the application process is fast and easy, with decisions in hours, not days. But that speed is balanced by the fact that the costs are higher than those of secured business line alternatives.

 

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Start Right Here to Receive a Business Line of Credit

These days, getting approval for a line of credit can be an easy process if you are dealing with the right company. It’s simple to apply for business term loans or credit lines — and even qualify for the funding your organization needs right from the comfort of your own home.

Both banks and online lenders offer a way to get a business line. However, banks typically have tighter qualifications than online lenders. As a result, these institutions are far more sluggish with their loan and credit operations, slowing down your business and causing stress. Online lenders are much more straightforward, with better approval rates and less stringent qualifications. However, they may charge higher rates than banks because they take on much more significant risks giving funding to a small business.

Although online lenders have better approval rates and fewer documentation requirements, you will still need to provide some data to back up your statements of creditworthiness. Online lenders often require these documents:

  • Bank account statements
  • Tax returns (if applicable)
  • Profit and loss statements (if applicable)
  • Balance sheets (if applicable)
  • Accounts payable and receivable (if applicable)

Requirements vary depending on the bank, credit union, business lender, or funder you use. Lines of credit offer a lot of flexibility and freedom, providing your operation with the cash flow you need now.

If you’re interested in a business line of credit, AdvancePoint Capital can help. We offer credit lines for small businesses across the country, helping countless small business owners get the funding they need. Whether it’s through a line of credit or through the various other business loans we offer, it’s easy to get funding with AdvancePoint Capital.

With us, the application process is quick and straightforward. We’ve streamlined everything so that you’re able to get the cash flow you need fast. At AdvancePoint Capital, applying is a breeze compared to the obstacles you go through with conventional lenders like banks.

What We Do

At AdvancePoint Capital, we offer multiple financing programs so you can find the one that works best for your operation. Every business is unique, and we believe in providing a wide selection of funding options so that you can discover a solution that’s suitable for your needs. At AdvancePoint Capital, you can shop, compare, and save on all types of loans and business financing.

Here’s what a line of credit might look like if you qualify with AdvancePoint Capital:

 

Basic Features of a Business 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

Rates

Starting at 6.99% and up

Eligibility Requirements at AdvancePoint

  • Easy one-page application
  • Bank statements
  • Financial statements – we focus on gross sales, not profit and loss!
  • Decently established personal and business credit scores (all are considered, from average to excellent)

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Why Choose a Small Business Line of Credit?

The best answer is that it’s flexible!

This is an excellent product for quick access and use of funds and a fast return on your capital investment. In fact, these are commonly used by manufacturers, contractors, and many other businesses as an investment. They will put their borrowed funds toward purchasing vital equipment or products that will then be sold at a profit within a short period. Therefore, this method is often better suited for these industries than another small business loan or short-term loan.

Keep in mind; the lender is covered by several protections with this product. They 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 change. However, don’t let that scare you. This can be a great benefit because your credit limit often grows 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.

Business Line of Credit FAQ: Is It Right for You?

What’s the difference between a business line of credit and a business loan?

A line of credit is essentially an account you can draw funds from and only pay back what you take out. It works somewhat like a credit card since it’s a revolving line of credit. You’re able to renew this cycle as many times as your lender allows.

In contrast, a business loan typically has a repayment term — either every day or week until the loan is entirely paid off.

What about a business line of credit and business credit cards?

We’ve mentioned the similarities between these two funding products, but what are the differences? While they may seem like the same financing solution on the surface, there are some contrasts. For example, business cards have much higher interest rates, charge additional fees for balance transfers or cash advances, and require monthly payments.

How do I pay back what I borrow?

Repayment is simple; All you have to do is repay what you owe! Say you’re approved for a line of credit amounting to $100,000, but you only withdraw $20,000. In that case, you only need to pay back what you’ve drawn out. However, the remaining $80,000 in funding will still be available for future needs.

What will my interest rates be like with a business line?

Several factors can affect your interest rates, such as time in business, credit rating, requested credit line amount, and annual revenue to your organization.

Are there limits on the use of funds?

No! Your small business can use a line of credit for nearly any business expense. Whether it’s your bills, cash flow management, emergency expenses, new inventory, or equipment purchases, the use of funds is unlimited.

Many of the popular funding uses for small businesses include:

  • On-demand access to cash
  • Working capital
  • Funds to increase inventory
  • Financing needs for equipment
  • Emergency short-term cash flow issues

What is the difference between a secured and unsecured line of credit?

Secured means that the business line of credit is secured with collateral such as property or a personal guarantee. An unsecured line of credit doesn’t require collateral or a personal guarantee. Businesses should expect a higher interest rate and lower credit limits without collateral. The best rates and terms require security.

What banks will offer small businesses a line of credit?

Not all banks prioritize providing business credit lines and loan options to startups or small businesses, as it’s a high-risk enterprise. Additionally, many banks require you to maintain a business bank account to apply for a line of credit. Others choose to offer only business credit cards or have much stricter guidelines.

You will have to do some background research to find a bank willing to offer a line of credit to you, such as the Bank of America Business Advantage Credit Line. However, you can always rely on alternative lenders or your local credit union if the bank doesn’t work out.

Does the Small Business Administration offer lines of credit?

Yes! The SBA provides not just loans but lines of credit through their CAPLines Program.

Is this the right funding option for me?

This answer is entirely up to you. Repayment terms are simple, so if you have a proven track record of making on-time payments and handling your cash flow correctly, a line of credit should be the perfect product for your small business.

Partner With AdvancePoint Capital for Your Business Line of Credit

AdvancePoint Capital is the number one place to get the funding your business needs now. We provide loans and financing tools for businesses of every size and caliber, helping you gain access to capital fast. Contact us today to learn more about a business line of credit and receive your free quote from AdvancePoint Capital.

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* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.