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Business Line of Credit

business line of credit

Capital is the fuel that ignites small business success. Without access to funding, it is almost impossible for a business to develop and grow to its full potential. But, most small business owners do not have the capital they need just sitting in a bank account. Access to credit is often the foundation of success.

Small business owners today face unique challenges when it comes to finding ways to fund growth. According to Rosemary Peavler, a business finance expert for about.com, prior to 2008, most successful small businesses had an established line of credit with their bank. But today, banks have tightened their lending guidelines in a way that excludes most small businesses.

The good news? A business line of credit is a viable, easier option in meeting the financial needs of your business. A cashadvance can be a quick way to get the funds needed for business expenses, but it is not the same as a business line of credit.

What is Business Line of Credit?

A business line of credit is a flexible loan alternative tailored to your business that allows you access, as needed, to a line of funding. It works sort of like a credit card only typically at better interest rates. There is an established limit to the credit, but the guidelines are not as stringent as with most small business loans.

In other words, less hoops to jump through and you use only what you need. Payments begin once you access funds and are set over a pre-determined period of time. They are based only on the amount borrowed, not the full line of credit.

What can a business line of credit do for you?

According to Investopedia.com, a line of credit is the perfect solution when it comes to ongoing and unpredictable funding challenges. Here are a few examples:

  • Purchase extra inventory or materials to meet anticipated demand, start a new endeavor or pursue a promising business opportunity.
  • Renovate or expand your existing business space, or purchase new technology that will support smoother operations or increase your capabilities.
  • Cover unexpected expenses that occur when there are lags between the cost of doing business and payments from customers.

 

Top five ways to establish a business line of credit

Now that you know what a business line of credit is and what it can do for you, here are the top ways to begin:

1) Start small, dream bigger: According to Bizbest.com, when you begin, you often have to accept whatever amount the lender is initially willing to let you have. This may not fit your aspirations, but you can build on this relationship. So take the line of credit offered, use it to the best of its ability, and pay it off on time and diligently.

2) Build a credit history: Entrepreneur.com suggests that it is wise to stay on top of your personal credit score as well as your business finances. In other words, pay bills on time and make sure balances on credit cards remain under 30 percent of the total available. Build your business credit through small lines offered by large retailers to businesses. A commercial credit account through OfficeMax, Staples or Home Depot can help build a credit history for your business.

3) Choose wisely: Look for a lender that has a customer-first approach and makes the process easy and accessible to you. If this is a funding option that you are looking to use now and in the future, then it should be with a lender you can do business with down the road.

4) Get your finances organized: You will be asked for some documentation and financial information about your business and its recent history, so be prepared with income, bank statements and perhaps tax returns.

5) Consider alternative lenders: Most small businesses are turning away from the requirements of the banking industry to other lending resources that focus more on the overall strength and health of their business. Some options even let you borrow against your accounts receivables. If your business is profitable and you can show this through bank statements, this is a great alternative, especially if you don’t meet the bank’s strict lending criteria.

Conclusion

Business lines of credit answer to fluctuating financial demands by making a specified amount of money available, if and when it is required. A business line of credit serves multiple, day-to-day needs with ease and flexibility.

Apply now for a Credibly loan alternative and confidently take your business into the future.