If you’re looking for a flexible financing option, a business line of credit may be a good fit for you. This type of loan works like a credit card, giving you access to funds when you need them and only paying interest on the amount that you withdraw.
What is a line of credit?
A business line of credit (LOC) from a trusted bank partner is a financing option that offers access to the funds you need (up to a maximum amount), when you need them. This option is known for its flexibility because you decide when and how to use your funds, and your interest-only monthly payments are based on the amount you actually use.
A line of credit is a type of revolving account. Traditional term loans, whether backed by the SBA or not, have a preset sum deposited upfront that’s repaid through equal payments over time. Lines of credit on the other hand, create a “revolving” cycle where borrowers have the ability to withdraw funds up to a set maximum at any time, repay that amount, and withdraw it again.
A line of credit may offer an additional $25,000 - $100,000 to optimize cash flow, cover operational expenses, and maintain financial stability for your business.
Typically, lines of credit are either secured or unsecured. In most cases, they are unsecured loans. This means that the lender doesn’t need any collateral to back the account.
If you’re looking for a line of credit, you’ll commonly find that they’re offered by local banks for smaller amounts than term loans. Other sources to look for funds include alternative lenders available through online platforms. SmartBiz® may help you open a business line of credit through a bank in our network.
Qualifying for a line of credit
Depending on your preferred lender and the type of LOC you’re applying for, you’ll find varying eligibility requirements. Most traditional bank lenders require good credit, strong revenue, and several years in business. They also typically require applicants to provide financial documentation including six months of business bank statements, a current debt schedule, an identification document, and a voided business check to demonstrate their business’s financial health.
Alternative lenders may have more flexible eligibility requirements and lower credit minimums.
Alternative funding options
A line of credit may be a useful financial tool for your small business but it may come with a steep price. For temporary, small-scale funding, these loans may be convenient because of their flexibility, but they might not be sustainable in terms of long-term cash flow.
That’s where SmartBiz can help. Our dedicated team understands that every business is unique, and has unique financing needs. We may help you open a business line of credit, or discover if another option like a Small Business Loan (SBA) or Bank Term Loan would be a better fit. Our streamlined online application helps you qualify for the funds you need.
Get started and apply today.