What Are The Top Benefits of a Business Line of Credit?
Most business owners prefer business lines of credit over other financing options. We have listed the top reasons that make LOC business owners favorite source of financing. The capital is “revolving,” meaning you can always draw and repay.
The capital is “revolving,” meaning you can always draw and repay.
Draw, Replace, Draw it Gain
A revolving business line of credit helps you access money to repay and withdraw once the borrowed funds are reimbursed, you can draw again. The capital is “revolving,” meaning you can always draw and repay.
True Interest Rate APR
Unlike other funding options like Merchant Cash Advance, a revolving line of credit uses lower true APR instead of following factor rates. As a result, most business owners prefer working with a revolving line of credit other than other products of lines of credit.
No Prepayment Penalties
Whether you want to pay off your credit all at once or pay down, no penalty is charged on any mode of payment. However, other lenders may charge a penalty fee for repayment models.
Build Your Credit as You Use It
Some types of lines of business line of credit, like a revolving line of credit, help you grow your FICO score each time you draw funds and repay.
Grow Your Credit Line and Your Business
Usually, the bank’s approach toward expanding business credit lines is demanding and slow. Thus hindering most businesses in acquiring flexible funds. But alternative financiers offer credit lines that help boost your business by giving you ready cash to chase more opportunities. You need to work with lenders who frequently review your credit lines. This will enable your business credit growth to increase rapidly.
Where Can I Get a Revolving Business Line of Credit?
You can work with either traditional lenders like banks and credit unions to secure a business line of credit or alternative private lenders.
But banks rarely offer revolving business lines of credit because they view unsecured lines of credit entirely controlled by business owners and could be riskier on their side than other options.
Ultimately, they impose higher FICO scores, leverage collaterals, high-interest rates, and require more extended time in business histories. Even with those requirements, the processing speed is slow, and there are high chances of disapproval.
Luckily, alternative private lenders offer revolving business lines of credit that are favorable for all business owners without putting up collateral. All you need are simple requirements like three months in business and a 650 FICO score.
Are You Limited to a Low Revolving Line of Credit?
Several factors may reduce the limit of your credit. Some lenders are more lenient than others. However, vital elements cut across like, businesses that fall under the “high risk” industry and a lower credit score. These factors may disqualify or limit your credit especially if you’re working with traditional lenders.
But some lenders look for your business growth potential and work with merchants across different industries. It’s important to choose lenders that will determine your limits, terms, and rates based on the possibility of growth of your business.
To ensure you wade through your options in a breeze, let a professional Business Funding Advisor help you find a revolving line of credit.
FAQs
What Credit Score Do I Need to Get a Business Line of Credit?
You need at least a FICO score of 600 to give you a higher chance of approval. But even with lower scores, you can potentially secure a line of credit.
Higher credit scores boost your chances of approval. So it’s worthwhile to start increasing your scores.
When Is the Right to Get a Line of Credit for a Business?
The best time to get a business line of credit is before you need it. A fast working capital helps manage cash flow, raise inventory, and pay off business expenses. But you can only do all these by having an already established line of credit.
Is It Easy to Get a Business Line of Credit?
The speed and ability to secure a line of credit are based on the type of lender you work with and your qualifications. For instance, if you have a 600+ FICO score, $100,000 annual revenue, and 3 months of business operation, you can quickly secure a business line of credit.
Remember, it’s still possible to secure credit even with lower credit scores and other requirements however, it may slow the process no matter what lender you work with.
