Business Line of Credit
A flexible financing option that gives businesses access to a set amount of funds to draw from as needed, with interest charged only on the amount used. This revolving credit allows businesses to manage cash flow, cover unexpected expenses, and fund growth opportunities effectively.
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Quick Stats
| Loan Amounts and Terms |
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|---|---|
| Repayment Schedule |
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| Requirements |
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| Funding Time |
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Borrow up to $100k
Term up to 12 months
Usually monthly
Repayments Fixed Monthly
Within one business day of approval
How Does A Compare?
How It Works
1
Apply
Submit the easy online application within minutes and a Capital Specialist will call to discuss your funding request.
2
Get A Decision
You will receive your approval status in as little as 4 hours after submitting all necessary documentation.
3
Receive Your Funds
You'll receive a lump-sum payout in as little as 24 hours of offer acceptance. Spend it at your own pace, as you need it.
How to Use a Business Line of Credit?
Lines of credit can be used to manage cash flow, cover operational costs, or bridge financial gaps during slow periods. It’s also a helpful tool for funding short-term projects or seizing unexpected business opportunities without the commitment of a long-term loan.
Cover Seasonal Expenses
Businesses with seasonal fluctuations in revenue can use a line of credit to manage cash flow during slower periods, ensuring they can meet payroll and other operational expenses.
Purchase Inventory in Bulk
Businesses can use a line of credit to buy inventory in bulk at a discount, allowing them to save on costs and improve profit margins without affecting cash reserves.
Fund Marketing Campaigns
A line of credit can provide the funds needed for short-term marketing campaigns, allowing businesses to promote new products or services and drive sales growth without a large upfront investment.
FAQs
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Yes, it can impact personal credit, but this largely depends on the structure of the agreement. When a personal guarantee is required, you're essentially tying your own credit to the business line. This means any missed payments or defaults could show up on your personal credit report, potentially lowering your score. However, some business line of credit lenders only report to business credit bureaus, so it's worth clarifying with your lender upfront.
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Securing a business line of credit isn't necessarily easy or hard—it really depends on the financial health of your business and the lender's criteria. Companies with a strong credit history, steady cash flow, and reliable financial documentation tend to have an easier time qualifying. For newer businesses or those with spotty financials, it might take a bit more effort, but alternative lending options exist to help bridge the gap.
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Business line of credit rates are influenced by several factors, including the creditworthiness of the business, the amount of collateral (for secured lines), and current market interest rates. Businesses with a solid credit history, stable cash flow, and valuable assets can often secure more favorable rates. Unsecured lines of credit tend to have higher rates since they pose a greater risk to lenders. Additionally, rates can vary based on the lender's terms, so it's wise to shop around and compare options before committing to a line of credit.
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A business line of credit is designed for business-related expenses, so using it for personal items is generally a no-go. Doing so could violate the terms of your credit agreement, leading to potential financial or legal issues, especially if it's discovered by the lender. Keeping personal and business finances separate not only ensures compliance with the agreement but also makes bookkeeping easier and protects your credit.
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It can affect your credit score, but it depends on the type of credit score we're talking about. For a business credit score, timely payments on a business line can boost it, while missed payments can pull it down. If there's a personal guarantee attached, it might also affect your personal credit. Always check whether the lender reports to business, personal, or both types of credit bureaus to understand where the impact might land.
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The interest you pay on a business line of credit is typically tax-deductible, but only if it's used for legitimate business purposes. This means expenses related to operations, equipment, or other business needs usually qualify. The IRS has specific guidelines, so consulting a tax advisor is smart to ensure all your deductions are above board and maximize tax benefits.
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Lines of credit for business can vary widely based on the lender, the business's creditworthiness, and financial profile. Some lines are relatively small, starting around $10,000, while others can stretch well beyond $1 million for businesses with substantial assets and credit strength. Lenders assess your financials to determine the amount they're willing to extend, so strong documentation can help secure a larger credit line.
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A secured business line of credit requires collateral—like inventory, equipment, or even real estate—which acts as a fallback for the lender. Because of this added security, businesses can often access higher credit limits and lower interest rates than with unsecured lines. This arrangement benefits businesses with valuable assets and can make financing less costly over time.
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An unsecured business line of credit doesn't require collateral, meaning there's no need to put up assets to get approved. Instead, lenders rely heavily on the business's creditworthiness and cash flow to gauge risk. While it's often more accessible for companies lacking assets to secure a line, unsecured options typically come with lower limits and higher interest rates to account for the added risk. Read more about secured and unsecured business lines of credit in our article: "How Do I Choose a Business Line of Credit?"
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For new businesses, obtaining a line of credit can be challenging, as lenders prefer a stable financial history. Building up business credit over time, maintaining a strong personal credit score, and preparing thorough financial documentation can make a difference. Startups may also want to consider secured options or approach community banks and lenders that specifically work with newer businesses and might be more flexible with requirements.
