A business line of credit allows business owners to borrow cash amounts up to a certain limit and pay interest on the money they borrow. This works the same as the credit card works, and then you repay the funds and can continue to draw on the same line.
A Start-up business line of credit is a flexible financing option that can help the new business to manage its business expenses. It helps them cover their cash flow and short-term working capital needs.
But it can be difficult for new businesses to qualify for or access these loans. This is because of the terms and conditions that the lenders or the banks demand. Most lenders offer these loans to businesses with one year in their business.
Apart from all this, it isn’t easy to find out the right type of company that can help you find the best loans. Therefore, BitX Funding is one of the best companies that offer the best loans that meet the specific needs of any business. So, let’s jump into it and learn more about these loans.
How Does a Business Line of Credit Work?
A business line of credit is like a credit card. A lender or a bank approves your loan application and sets an amount of financing you can draw from at your discretion.
Once the borrower repays the amount they must spend, they can continue to draw capital from their line of credit. They must pay interest on the amount they use. This type of financing is also known as revolving credit because you can use the funding again and again.
For instance, you got approval for the loan amount of $60,000, and now you have decided you take out $30,000. Still, you have the other $30,000 in the pool of funds. Once you repay the $30,000 back plus the interest rate, you will again have $60,000 at your fingertips. Thus, you don’t need to apply for another loan.
The best thing is that this business line of credit typically doesn’t have term lengths. You can draw out the money and pay back those funds indefinitely. If your lender believes you will pay the amount on time.
Thus, you save a lot of your time and energy, which is one of the biggest benefits of a business line of credit for a start-up. But some business lines of credit will not automatically renew after you have paid the full amount that you draw out.
There are some non-revolving lenders, and you must reapply to renew your line of credit. But the second time you apply is an easy and smooth process. Furthermore, this business line of credit is sometimes also differentiated as short-term or medium-term lines of credit. These differences are in their qualifications, maximum fund amount, and interest rates.
If you want to go with a long-term business line of credit, you can get these from a traditional bank. While on the other hand, short-term and medium-term lines of credit are available with online lenders.
Another major difference exists in the lines of a secured and unsecured business line of credit. But this completely depends on the nature of your business and which one you want to choose.
If you decide on a secured business line of credit, you must give some collateral to ensure it. Otherwise, it is risky for the lender to approve your loan request. This collateral can be personal assets or any other thing the lender can use if you cannot repay the loan amount.
On the other side, if you want to go with an unsecured business line of credit, you don’t need to put collateral. But there would be additional terms and conditions of the lender that you must fulfil to get approval for the loan.
How to Use Business Lines of Credit for Start-ups?
One of the biggest advantages of a business line of credit is it’s revolving, which means you can draw as many funds as you can, pay them back, and draw again.
Thus, you can use the business line of credit for various purposes, such as:
- Managing ongoing business expenses
- Cover cash flow gaps
- Best against the business emergencies
- Cover seasonal cash flow
- Make larger purchases
- Take advantage of any unexpected opportunities
- Cover downturns
This flexibility is the major thing that makes the business line of credit more valuable in the eyes of business owners. If something urgent or unexpected happens, you will have the money to handle any situation properly, and you can deal with that easily.
Who can Qualify for the Business Lines of Credit?
This is the most asked question, so anyone younger or having a less established business can qualify for the short-term line of credit. But if you want to apply for medium-term lines of credit, you must have good credit and financial history.
Moreover, there are a few things that you should keep in your mind before applying for these lines of credit. The maximum amount available for funding, duration of the line of credit, repayment terms that depends on the business’s revenues, credit history, and other factors.
Thus, you can ask the lender with whom you are applying for the loan. These terms and conditions vary from one lender to another. So, discuss the thing in detail to avoid any inconvenience.
How can you Apply for the Business Line of Credit for a Start-up?
Most people don’t know the entire procedure of applying for a loan. It is an easy process, but it depends on the nature of the business and the lender with whom you are working.
Online business lines of credit provide quick applications and offer borrowers small and short-term loan options. On the other hand, traditional banks have more intensive applications and take a long time to approve. But they offer larger and longer-term lines of credit.
Thus, here is a list of documents you will need for the application process. It would be best to read all these papers before you go to the lenders. As it will give them a nice impression of your personality and exhibit your extensive knowledge about the loan.
- Credit score
- Business revenue
- Business plan
- Personal credit history
- Business credit history
- Personal tax returns
- Business tax returns
- Profit and loss statements
- Balance sheet
If you have all the documents mentioned earlier, the next step is to fill out the application, and you are done.
Require Help? Call BitX Funding at 203-763-1430
You don’t need to worry if you are confused and don’t know the best line of credit for your business. BitX Funding is a top-class financial company that offers its customers the best financing services.
We have experts with decade-long experience in this field who review your business history and suggest you the best loan that meets the requirements of your business.
The Bottom Line!
To summarize the discussion, we can say that it is a fact that businesses must face tough times, and a loan can help them in those times. But this can be tough to find the right business line of credit for your business; therefore, BitX Funding is here to help. You can rely on our experts to help you find the best business line of credit for a start-up. The best thing is that all our services are affordable, so you can easily discuss anything with our financial experts. They will help you not only in finding but also with the application procedure.