Looking for funding options for your business?
There are many funding programs available for business owners, from short and long term loans, collateral and non-collateral loans, SBA loans, merchant processing, and financing. Each of these products includes certain restrictions depending on the lender, the amount, and the type of loan. There is one option not mentioned that offers no restrictions on how the money is spent and that is a business line of credit.
What can you do with a business line of credit?
A business line of credit is an extremely flexible funding option for business owners. Once approved, your business can have cash available on demand. The cash can be used for virtually any business need including payroll, business expansion, supplies, repairs, equipment purchases, inventory, employee bonuses, advertising and more. The uses are at the discretion of the business owner. The cash is there when you need it and you can save by only using what you need.
The interest rates of a business line of credit are often in line with other types of loans. If the business’s characteristics are sound, meaning the financial profile is strong and the business has been open for a while, the interest rate may be as low as 5%. If there are issues with the business financial profile, the interest rate could be as high as 20%. One of the greatest benefits is the opportunity to pay zero interest if the amount you use is repaid quickly.
A business line of credit is a viable solution for businesses with a good revenue stream as well as a strong projected revenue stream. They can be a risky option if your business is having revenue difficulties and will likely take a longer time to repay any used funds.
What are the pros and cons of using a business line of credit?
There are many positives with the line of credit funding option:
- Quick approval process
- Receive funding quickly
- Many lending options to choose from
- Helps with unexpected expenses
- Cash available when you need it
- Zero interest when repaid promptly
- Adds flexibility for the business
With the good, there are also some cons to a business line of credit.
- Risk of increasing debt if revenue is not solid
- High interest rates for some business profiles
- High interest rate if carrying a balance
- Risk of lender reducing the credit line
If you want to learn more about your available funding options, talk to a lending specialist. They will help you find the right funding program for your business need.