Business Line of Credit

A business line of credit is a very common form of financing offered by most business banks.  It is basically like business capital on tap that you can access at any time up to a certain amount agreed upon by you and the lender.  Normally, there is no collateral required to gain approval, unless the credit score criteria of the individual applicant and/or business is not met. 

A business line of credit is a true asset of your business to help meet the short term working capital needs like covering cash flow shortages or purchasing increased seasonal inventory or unforeseen operating expenses.

The amount your business is able to receive from a business line of credit will depend on your business past revenues and projected annual cash flow.  A positive cash flow and the ability to demonstrate debt coverage will be required for approval.  This means your business must in most cases to be profitable and able to repay debt on regular monthly payments. 

A good test to see if your business will qualify is to examine your business bank account to determine if there has been sufficient cash in, cash out, and average daily balances to adequately support the loan repayment. 

A business line of credit is typically revolving like a credit card, has no fixed payments terms and is based on an adjustable market based interest rate.  Some have a feature of only requiring monthly interest only payments to be made in order to keep the payments small while your business grows.  In most cases you can elect to make the full monthly payment of both principle and interest when you wish to and can pay the full balance at any time without penalty prior to the maturity date. 

About Lines of Credit

A business line of credit gives your business access to cash, whenever you need it, up to a pre-specified amount.  The main advantage of a line of credit is flexibility.  Funds are always available when you need them, but you pay no interest until you draw on the line which makes it great for emergencies.  The line can be secured or unsecured, with multiple repayment options, and a variable interest rate.

Business lines of credit are great for a variety of ongoing or short-term financing needs, such as improving cash flow, acquiring seasonal working capital, purchasing inventory, materials, or equipment, and financing accounts receivable.