A business line of credit offers you access to cash every time you need it and is very flexible financing option. This sort of loan permits you to draw cash out of your credit limit as you want it, and only pay interest on what you use.
With revolving lines of credit, more money becomes available as you pay it down. Unlike selling equity, getting a small business loan allows you to keep business ownership, profits and complete control. Business lines of credit are the best financing tool while your business is in scaling and you need access to funds.
You also can use it to bridge cash flow gaps through seasonal slumps, or as a emergency fund. There are no regulations on how you can use it—you may use a business line of credit to cover any expenses or opportunities you face.
How does a business Line of Credit Work?
Business lines of credit work like credit cards, however with a unique structure that’s better suited for business owners. They’re also better for tax purposes—you could write off interest on a credit line, however you cannot for a personal credit card.
After you qualify for a business line of credit, you’ll receive a maximum credit limit. You can draw as the maximum amount or as little as you need from that total limit in any quantity of installments, and there's no obligation to use the entire amount.
You can continue to access extra capital as you pay it down. Instead of paying interest on the entire credit limit, you’ll only pay interest on what you use. Depending on your lender, you could have a non utilization fee, and may have to pay for the line if you don’t use it. Before signing an agreement, make sure to ask for information about any fees. Avoid any agreements without clear, transparent terms.
What Is Required for a Business Line of Credit?
Applying and qualifying for a business line of credit can take some effort, however it’s no longer hard or time-consuming. Different lenders have numerous qualifications, so whether or not you qualify can range based on where you apply.
Banks and credit unions usually have super aggressive and demanding qualifications. If your business doesn’t have a spotless financial record, qualifying may be hard. Even if your application is denied at a bank, you could qualify based on your annual income at an online lender.
Trust Capital is a direct lender and we have relations with multiple other business lenders. We focus on your business and opportunity for growth over factors like borrowing history and credit score. To qualify for a business line of credit at Trust Capital Funding, all you need is: a minimum of $120,000 in yearly revenue and a 680 credit score.