Obtaining and utilizing small business funding can be a challenge for many of the small businesses that fail every year. A business line of credit may be the answer for your small business funding needs.
It provides numerous benefits, and serves as a safety net to help you handle unexpected bills, purchases, expenses, and allows the flexibility for you to pursue opportunities for growth.
It can be invaluable in the early stages of a small business’ life cycle, and is well-suited for use later on during expansion, growth, or other periods of large expenditures as well.
Learn more about small business lines of credit, how they work, and what their benefits are in our guide below.
What is a Business Line of Credit?
A business line of credit is similar to many of the other forms of small business funding that are available, including a small business loan and a business credit card. But it’s somewhat different, too, which makes it a unique financial instrument.
Some of the similarities and differences include:
- Small business lines of credit are similar to unsecured small business loans, in that they don’t have any collateral requirements as part of the business line of credit application.
- A business line of credit provides access to funds that you can use for business expenses as you see fit.
- A line of credit does NOT provide a lump-sum payment up-front. You are approved for a certain borrowing limit, and can withdraw as little or as much as you need towards that limit at any time.
- You can also pay back the outstanding balance on the business line of credit, and then borrow against it again, on a revolving basis.
- You can also pay back the outstanding balance on the business line of credit, and then borrow against it again, on a revolving basis.
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You are only charged interest on the portion of the balance outstanding, rather than the credit limit. This can be advantageous in terms of saving you money vs. a traditional small business loan, if you don’t need all the funds at once and have flexible, variable cash needs over time.
In this way, coupled with the revolving nature of the business line of credit, it is similar to a traditional credit card account.
As an example of how a small business line of credit works, imagine you are approved for a $100,000 credit line. You may take out $20,000 to pay for the purchase of a new piece of equipment for your business.
This means you still have the ability to borrow $80,000 more against that line of credit as needed. Once you repay the principal and interest on the $20,000, you’ll be back to having a potential $100,000 to borrow against again.
And this process repeats on a revolving basis for as long as you desire. That’s the beauty of getting a business line of credit – it lets you have access to funds, without requiring you to use them all at once, allowing you to borrow just what you need, when you need it.
Is a Business Line of Credit Right for My Business?
Like all financial decisions related to your small business, you’ll have to decide if a small business line of credit is the right choice for you. It may be ideal coupled with other, traditional lending or small business funding products.
Or, it may be the only option you need to have flexible funding, manage your cash flow, and to provide a buffer or safety net for your day to day operational expenses. Most often, business line of credit terms will help steer you towards the best use for your business.
Highly seasonal businesses often find business line of credit terms to be the most beneficial, due to the flexibility that they provide over traditional small business loans.
When your income or revenue is uneven and variable, or cyclical, it’s good to have the kind of borrowing flexibility that a business line of credit can provide.
It’s much easier to qualify for a business line of credit if your business is solid, and then draw against it when things are not going so well, rather than the other way around.
Benefits of a Business Line of Credit
There are many benefits to having a small business line of credit available.
The overall reason for utilizing a small business line of credit is to have the financial flexibility to weather hard times, pounce on opportunities in good times, and ensure you can meet your expenses and avoid defaulting on debts.
Specifically, benefits include:
- Stay out of default and boost your business credit score
- Access small business loans and other credit products with lower interest rates as a result of your good credit and financial stability
- Have the flexibility to handle business downturns, upticks in expenses, unforeseen problems or purchases, equipment breakdown or repair needs, and so on
- Be able to react quickly to changes in the market, and to seize opportunities that may require heavy investment but offer large rewards
- Don’t pay interest on a loan amount when you don’t know how much you will need, and may not need to utilize the entire amount – just pay for what you actually use
- Revolving nature of a business line of credit means you don’t need to keep wasting time going to banks or lenders for additional loans or new terms, saving time, money, and hassle
Business Lines of Credit from BizFly Funding
If getting a business line of credit sounds like a good small business funding option for you, then contact us at BizFly Funding today. We offer competitive rates and a large range of line of credit options.
Our business line of credit application process is quite easy – you can be approved in as little as 30 minutes. When you apply, one of our team members will review your application and financial data and get back to you as quickly as possible.
Credit lines can often be established within 24 hours following approval. When you choose BizFly Funding, you’re getting the benefit of excellent service, a wide range of industry experience, and a commitment to honesty, transparency, and reliability.
Our business line of credit terms, and the minimum requirements for a business line of credit are kept to the minimum, such that we can offer our services to as many small businesses as possible.
So contact us today, and get on your way to having a flexible and affordable small business line of credit to support your small business in 2019 and beyond!
