A business line of credit is a type of financing that gives companies flexible and easy access to funds for working capital purposes. In a recent wall street Journal survey, 40% of small business owners said they couldn’t explain a single one of the small-business financing options available to them. At the same time, 3 out of 4 small businesses said they had struggled with a cash flow gap.
This means many business owners are struggling with a fixable problem. And with the rise of online lenders, there are more financing options than ever. If you can build a cash cushion, you’ll be in great shape to manage your businesses without outside financing. Otherwise, one of the more popular working capital financing options is a business line of credit, sometimes called a “revolving line of credit”, or just simply, a “revolver”.
Companies with a revolver can tap into the funds as the need arises. As the amount is repaid, they can continue tapping into the line of credit continuously without having to repeatedly apply for a new loan.
The funds can be used in part or full, by the borrower, and can usually be paid back either in installments, or as a lump sum payment. It makes for a convenient source of cash for meeting payroll, purchasing supplies or inventory, meeting unexpected expenses or expanding a business.
1) You can draw from a business line of credit at any time.
With a regular loan, you get all of the money when you are approved. With a line of credit, you are approved for a certain amount – but you can decide when to actually borrow the money, and you can borrow as much or as little as you want until you hit the credit limit.
2) You can use a business line of credit for any business purpose.
Some types of financing (like an equipment loan) can only be used for specific purposes (like purchasing equipment). A revolving line of credit can be used for anything business-related, and you can usually draw on it at any time as long as you are under your credit limit.
3) A business line of credit replenishes.
If you pay back a standard term loan and want another, you must reapply for the next loan. With a line of credit, however, you can keep using funding after a single application and approval.
A $10,000 line means that you can have up to $10,000 drawn at any time. If you draw $3,000, then you still have $7,000 available. And as soon as you repay that $3,000, then your available credit goes back up to $10,000. This lets you keep drawing repeatedly from the same line of credit without having to reapply every time, which is why it is sometimes called a “revolving” line of credit or simply a “revolver.”
Here are a few features which give business owners peace of mind.
Flexibility.
The ability to draw at any time, for any reason, is a powerful tool for a business. That means a line of credit can help meet unexpected expenses, it can bridge a payroll until a client pays, or it can be used to invest in growth by expanding inventory or paying for an ad campaign.
Speed.
Online lenders can approve business lines of credit within 24 hours and then have cash in your bank account as fast as same-day.
Simplicity.
Since the credit line replenishes, a single, paperless application today can give a business a long-term tool. No more applying for loan after loan when they expire, or paying big cash advance fees on credit cards, or having to put the brakes on your business when your financing goes away.
Pay only for what you need.
The National Federation of Independent Businesses calls it an “insurance policy that never needs to be paid until you need it.” If you use a reputable lender, you’re in control of your costs. If you don’t use any of your credit for a month, you will pay $0 in that month. If you decide to pay off your full amount early, you should be charged only for the time you had the money.
Because a business line of credit lets you draw funds when you need them and for any use, it can help businesses that have seasonal cycles, monthly cash flow fluctuations, have “lumpy” cash flow, or need to invest in their business in order to grow. For the 77% of small businesses who reported having cash flow gaps, a revolving credit line could be exactly what they need to bridge that gap.
If you have been in business for at least 6 months and have a minimum credit score of 670. I can email you a link for an unsecured credit line of up to 50,000. Simply send me a message or call me at 844-515-4645.
- Kenneth
