One of the tools in the proverbial toolbox that small business owners have to accomplish that task is a business line of credit. It can be incredibly useful to have a line of credit, even as a safety net or buffer – even if you never plan to use it except for emergencies.
Since so many small businesses fail due to cash flow or funding issues, a business line of credit simply makes sense.
But what is it, exactly, and how does it work? And if you’re in a pinch, how can you obtain a business line of credit quickly and easily? Read on to find out more.
What is a Business Line of Credit?
To start, let’s look at what a business line of credit is, and how it operates. For those who are unfamiliar, a line of credit, in general terms, is a type of credit product.
It operates less like a loan and more like a credit card account, though without the credit card in most cases. Essentially, this kind of account provides you with a set credit limit (usually spelled out during approval as part of the business line of credit terms).
You can then borrow any amount from the line of credit, up to the limit. You pay interest on the outstanding balance only, and pay it back over time. You can borrow again and again, up to the limit, in increments of your choosing and as needed.
That makes it significantly different than a typical small business loan, where you get the money up front, all at once, pay it back over time with interest, and then that’s it and it’s done.
The ongoing nature of a business line of credit means they are often referred to by other names, such as revolving credit facilities, and not usually classed in with small business loans as a loan, per se.
And, unlike a credit card account, the money you borrow from the business line of credit is available as cash in your bank account, to spend on your business expenses as you see fit.
By contrast, credit cards can only be used for merchant purchases in most cases, and cash advances usually come with a separate, often extremely high interest rate or set of fees.
So, while the mechanics are similar to a credit card account, a line of credit is definitely not the same as a credit card.
What are the Pros and Cons of a Small Business Line of Credit?
Like any small business funding option, there are tradeoffs between the benefits and drawbacks to a business line of credit. There are also certain use cases and types of spending and expenses that are more well-suited to a line of credit than a small business loan, and vice versa.
To start, loans are extremely useful for projects and set spending or expenses for discrete events, where you have a sense up front as to when you’ll need funds, and how much.
They’re not particularly useful when you want to use them for periodic funding needs, since you pay interest on the entire loan balance the whole time.
This weakness of small business loans is a strength of business lines of credit, since you have total flexibility to draw down only as much as you need, when you need it.
Business lines of credit also typically have more competitive interest rates than those found on small business loans and many other types of small business funding. This means you pay less for the use of the credit facility.
On the flipside, though, the requirements to qualify for a line of credit tend to be harder to satisfy than many other small business funding options available. This is largely because of the trust a lender is placing in you and your business by issuing you an open, revolving credit account.
Assuming you meet the credit score, time in business, and revenue requirements that most lenders have for a business line of credit, however, it can be an incredibly useful, cost-effective small business funding tool, especially for intermittent small-to-medium size expenses, or a safety net or hedge against unforeseen bills, repair expenses, expansion needs, and so on.
How Can I Get the Best Business Line of Credit Terms and Access the Line ASAP?
No matter if you choose a bank or an alternative non-bank lender, the advice on how to obtain the best business line of credit terms, and get approved as soon as possible, is largely the same.
Businesses need to meet the minimum time in business requirements of the lender, as well as the monthly revenue requirements.
Perhaps most importantly, before you fill out a business line of credit application, you’ll need to be sure you meet the minimum credit score requirement that the lender mandates.
In general, these are much higher and harder to qualify for than other kinds of small business funding. And, like most small business funding options, those requirements tend to be even higher with a bank or traditional lender than a non-bank, alternative or private lender.
If you meet all the terms to qualify for a business line of credit, be sure all your documentation and paperwork is in order, and go ahead and apply.
Many non-bank alternative lenders have online approval or pre-approval applications, and can get back to you within hours to get things finalized. BizFly Funding is one of those lenders. Many customers who apply for a business line of credit can have access within 1 business day.
BizFly Funding specializes exclusively in small business funding, and has a full range of options, including small business loans and business lines of credit, among many others.
Requirements for a Business Line of Credit Application at BizFly Funding
To qualify for a business line of credit at BizFly Funding, your business needs:
- To have been in business for at least 6 months.
- To generate at least $10,000 in monthly revenue.
- To have a credit score of at least 650.
These requirements are a bit higher than many of the other small business funding options that BizFly Funding offers. Still, they are far more attainable than the requirements put in place by banks and traditional lenders.
If your business doesn’t qualify, there are still plenty of other small business funding options available, many of which have lower credit score requirements (some as low as 500), smaller revenue requirements, and shorter time-in-business requirements, too.
Find out more at https://bizflyfunding.com.
