When people think of business financing, the first thing that they usually consider is a traditional loan. However, lines of credit offer attractive alternatives that may even suit your company’s needs better. Here is some information you should be aware of about this versatile method of funding.
Business Lines of Credit Basics
Business lines of credit generally function as revolving credit lines. Once a specific maximum amount is approved by your lender, you have access to the full amount or any part of it. You only pay interest on the number of funds that you borrow. Once you have paid back the money you have borrowed, you have access to it again.
How to Apply
You can apply for business lines of credit from either traditional banks or online lenders. Banks may require more financial documentation and take longer to come to a decision, but their rates are usually lower. Online lenders reply quickly and have less stringent requirements, but their interest rates are higher. Lenders will want to know your personal credit score, assess your company’s cash flow, and review your company’s revenue statements and bank account balance.
Advantages of Lines of Credit
Lines of credit offer versatile financing options. Even if you are approved for a line of credit, you don’t have to use the funds unless you need them, and you only pay interest on what you use. It provides a measure of security for your company. You have finances ready and available to you in the event of an emergency or a sudden opportunity for growth. It’s easy to use lines of credit in tandem with other forms of financing such as loans or invoice factoring. You can also use a line of credit to improve your credit score by borrowing funds and then paying back the full amount on time.
For more advice on business lines of credit, get in touch with Ambition Funding Solutions.