Everything You Need to Know About Business Lines of Credit
If you’re like most business owners, finding the money you need to finance your company’s growth isn’t easy. There are traditional loans, but unless you have great credit and are sure you’re able to repay the full amount of the loan quickly, qualifying for those loans may be difficult. So, how can you get the money you need when you need it? Business lines of credit could be the best option.
What a Business Line of Credit Is
A business line of credit works a lot like your personal credit card, but can only be used for business purposes. The credit issuer gives you a set credit limit based on your business’s industry, your credit score, and your regular profits. You’re free to use that business line of credit as needed to finance your company’s growth and can use the exact amount of money you need at any given time. Once you pay off what you spend, you’re able to charge more on the account and repeat the process. This allows you to finance your business’s growth and invest in improvements as needed when needed.
Keep in mind that you’ll owe interest on the charges you make. The less you spend, the lower your interest payments will be. With a traditional business loan, you’re responsible for paying interest on the full amount of the loan, even if you don’t use the full amount you’re issued.
How To Apply
Applying for a business line of credit is a lot like applying for a traditional business loan. You’ll need to know your personal and business credit score and be able to show that you’re consistently generating profits for a set period. It’s also easier to qualify for the line of credit if you’ve been in business for several years. Compile your business bank statements, tax returns, and proof of business history and apply for credit with local lenders.
It’s best to shop around and get quotes from several lenders before making your decision. Like loans, you’ll pay interest on your lines of credit. Lenders will view your financial situation in different ways. This means one lender may be willing to offer you a lower interest rate while another may charge you a higher rate. Shop around, compare the terms and rates each lender provides, and go with the lender that offers you the largest line of credit and the lowest interest rate.
Lines of credit are a great alternative to traditional business loans and are worth considering if you need flexible cash quickly.
At TCF Capital, we help business owners from industries secure financing to aid with everyday operation expenses or continued business growth. If you have a commercial finance need, chances are we can help you meet it quickly and efficiently, so you can get back to business.