Whether you’ve just gotten started and need extra inventory, have been operating for a while and are having equipment malfunction, or are experiencing another situation in between, having quick access to extra capital is imperative to launching and running a small business.
There are several different types of loans and financing options out there, which you can apply for to get extra capital to cover situations in which you find yourself in need of extra funds, but sometimes the process of applying, getting approved, and getting the money can take too long and leave you in a tough spot.
Business lines of credit are a great option created for the specific purpose of providing quick access to capital to cover short-term needs. If you’re in need of quick capital, then a business line of credit may be the perfect solution for you.
What Is a Business Line of Credit?
A business line of credit is typically a revolving loan, which means that after the business pays a specific fee it has access to the specified amount of funds allotted through the line of credit, as needed. A business line of credit is similar to a credit card in that it is always available for use, up to the set amount, and interest is only paid on the amount of money pulled from the line of credit.
Rather than taking out a loan which will provide you with money in one lump sum, you can use a business line of credit for constant access to capital that you need quickly. And when the balance of the line of credit is paid down, you have access to use an even greater amount in the future and can cover unforeseen expenses or bills that need to be covered right away.
Frequently Asked Questions about Business Lines of Credit
Business lines of credit are a great option for small businesses and can even be a lifesaver in times of need. If you’re considering a business line of credit, you probably have some questions to ask before getting started. Here are answers to some of the most frequently asked questions about business lines of credit.
How do I know if I qualify for a business line of credit?
There are a few different requirements to qualify for a business line of credit. For example, some lenders will not extend a business line of credit unless you have been operating for at least two years. Your business must also be profitable and be able to show that through revenues. Lenders will also look at financial ratios like your debt ratio, etc. They may also look into the personal credit of business owners, personal assets, and so on.
If you have any questions about qualifying for a business line of credit, you can contact us now.
How can I apply for a business line of credit?
Different lenders will have different ways for you to apply for a business line of credit. Some may have online applications, while others may require that you come into their brick and mortar location in order to apply. There are a lot of different lenders, so do your research before signing with just one.
We are a direct lender and have an extensive network of other lenders as well; you can contact us now with any questions you have about applying for a business line of credit.
Will I have to put up collateral?
That will depend on the type of business line of credit you choose. An unsecured business line of credit requires no asset as collateral, but they can sometimes be more difficult to get approved. A secured business line of credit does require that an asset is put up as collateral, but can be easier to get approval for since there is more security for the lender.
If you have any questions about unsecured and secured business lines of credit, you can contact us now.
What is the interest rate for business lines of credit?
Your interest rate will depend on a few different factors, like your credit score and history, your business, and so on. Generally speaking, rates range anywhere from 5 to 25 percent, but can sometimes be higher or lower depending on the lender and the factors mentioned above.
If you have questions about the interest rates for business lines of credit, you can contact the Currency Capital team for additional guidance.
How can I access the money in my business line of credit?
There are a few different ways you can pull funds from a business line of credit. Most lenders will provide checks or a card, but you can also transfer funds directly from the account. If you have any other questions regarding business lines of credit and applying, feel free to contact us now.
Do you think a business line of credit is a good fit for you? Why or why not?