Fast Way To Get $50K In A Business Line Of Credit
Whether you have a small business or a large established business, you probably know that sometimes businesses face cash flow issues. Your company may be short of operating funds while you wait for invoices to be paid, you may need to buy raw materials before you can produce goods to sell, or you may want to expand operations and not have the funds in your business checking account to do so yet.
While there are lots of reasons your business may need to borrow, obtaining credit can be challenging as a small business owner. One popular option for many companies is a business line of credit. A business line of credit allows you to borrow up to a certain limit, but you don’t have to borrow the money all at once. You can draw from the funds available on your credit line, pay back the money as you borrow, and borrow as much as you need up to your credit limit.
Many financial institutions, including banks and credit unions, may offer you a business line of credit—but you need to shop around to find financing with the right loan terms. This guide on business lines of credit can help you better manage your cash flow by accessing affordable credit and getting the funding you need.
Qualifying for a Business Line of Credit
Compared to small business loans, a business line of credit is easier to qualify for, and it often does not require collateral such as a building or equipment to secure the credit line. Collateral means that you pledge assets, such as equipment, in order to obtain the loan. The lender has a legal interest in the assets that are guaranteeing the loan and can seize the assets if you don’t repay what you owe.
While collateral isn’t always required for a business line of credit, it may be if you borrow a substantial amount of money or if the lender has reason to worry that your company won’t be able to repay what you owe. And regardless of whether collateral is mandated or not, you’ll still need to submit an application to obtain a business line of credit—and will need to provide the financial information the lender needs to decide how risky it is to lend to you.
Your application to a lender will detail the business revenue, time in operation, and assets on hand. You may need to provide documentation to potential lenders, including:
- Personal tax returns
- Business tax returns
- Bank statements
- A profit-and-loss statement
- Your company’s balance sheet
- A business and personal credit score
The stronger your company’s financial situation, the higher the probability of getting approved for a new business line of credit. If your company can’t qualify on its own, you could also cosign for the business. If you have good personal credit, this could help you get approved—but you take a risk because you become personally liable for repaying the company’s debts.
It’s also important to recognize that business lines of credit have higher interest rates than business loans, which helps offset some risk lenders take on in granting approvals to a business with less than perfect financial records or revenue history. That means it might be easier to meet the requirements for a line of credit, but the cost could be far higher than a traditional business loan.
Pros and Cons of a Business Line of Credit
There are both advantages and disadvantages of obtaining a business line of credit. You should carefully weigh the pros and cons and compare a business line of credit to other financing solutions when you decide how best to borrow to fund your business.
Pros of a Business Line of Credit
Here are some of the biggest advantages to a business line of credit: You only pay interest on the money you use: You can borrow as much or as little as you need to, up to your credit limit, and will only pay interest on the loan balance you have outstanding.
You’ll have flexible access to money:
When you need cash to meet your company’s needs, the funds will be there whenever you need them. You can also use the money for any business purpose you want, unlike certain other types of loans, such as equipment loans you can use only to buy new equipment for your business.
Qualifying is easier:
It’s generally faster and simpler to obtain a business line of credit than many other types of financing. If your company doesn’t have an established credit history or you aren’t a perfect borrower because your company has some financial issues, you can usually still get approved.
You can build credit:
By taking out a business line of credit, borrowing as needed, and repaying the loan due over time, you can help to build your business credit.
Cons of a Business Line of Credit
There are also some downsides to obtaining a business line of credit. Some of these downsides include:
A higher interest rate:
The interest rate may be higher on a business line of credit than certain other types of financing because lenders take on more risk.
Ongoing paperwork requirements:
You may be required to submit new financial paperwork each time you draw funds from your business line of credit. Fluctuating interest rates: Many business lines of credit have variable interest rates, so you may have to pay higher interest depending upon market rates when you borrow. Some business lines of credit charge annual fees or setup fees: These fees can make borrowing more expensive.
What to Consider When Comparing Business Lines of Credit
Many lenders offer business lines of credit, so you have options when it comes to securing this type of financing. It’s important to shop around and find the right loan for your particular situation. Some things that you should consider when you compare loans include:
Some lenders have more stringent qualifying requirements than others. If your company doesn’t have perfect credit and solid financial, you may need a lender that makes qualifying easier. Many online lenders aren’t as strict as traditional banks when deciding whether to extend a line of credit to companies.
Most loans have variable rates, so you should be aware that rates can change. Look at starting interest rates, rules for rate changes, and the index that the variable rate is tied to. You want to find a loan that offers the most affordable possible rate so that borrowing doesn’t cost your company as much.
You may want to have access to a larger line of credit so you have more flexibility in case your business needs to borrow a lot due to a cash flow crunch or a big expansion. But be aware that the more you borrow, the more it will cost you to pay back the loan.
How are minimum payments determined when you borrow? You’ll want to make sure the monthly payments will be affordable for your company. Loan fees: Compare setup fees and annual fees from lenders, as these fees can vary and can make financing more costly. It’s a good idea to compare loans from a few different lenders so you can get an idea of who will offer you the best loan to make borrowing as affordable as possible for your company.
Other Small Business Financing
Before obtaining a business line of credit, you should also consider other financing alternatives. This could include:
Business credit cards:
Credit cards offer you revolving credit, so you can borrow what you need up to your credit limit. Qualifying for a credit card is faster and easier in most cases than getting a business line, but interest rates can be much higher.
A term loan is a loan for a set amount of money for a fixed period of time. You can get a general business loan or more specialized loans, such as equipment loans. Term loans can come from many lenders, and you could even obtain Small Business Administration (SBA) loans that are guaranteed by the Small Business Administration. Term loans may be more difficult to qualify for than a business line of credit, and you have less flexibility in using the funds since you just borrow a set amount and pay it back over time. But payments are predictable, and interest rates are often lower. No matter what type of financing you choose, you also need to make sure you can afford to pay back everything you borrow so you don’t put your business at risk.
|Start Up Line of Credit||Short Term Loans||Long Term Loans||Business Lines of Credit|
|BitX Funding start-up financing program connects entrepreneurs and business owners with $25,000 – $150,000+ in unsecured business lines of credit. This program can provide you with funding in as little as 10 days and is typically offered with 0% interest financing for the first 6-18 months.||Designed to help meet short-term needs, such as unexpected events, or to take advantage of a great deal. Typically, most small business owners qualify.||BitX Funding offers true long-term business loans with automatic monthly payments. If you are looking to Fund larger projects that pay back over a longer term with rates as low as 5.49% this option may be right for you?||Business lines of credit allow you to draw funds whenever you need. Funds will be deposited directly into your bank account. Repay via automated weekly debits over six months. Your available balance replenishes as payments clear. Lines of credit can go as high as $100,000 with interest rates averaging around 13%.|
BitX Funding is the online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and we are passionate about helping your company reach its full potential.
You can reach loans specialist by toll-free at 1-800-824-2407, or email at firstname.lastname@example.org or applying online here and we can guide you on which loans are the best fit for your business.