What is a Revolving Business Line of Credit(RLOC)?
A revolving business line of credit gives you access to consistent, flexible, and reliable funds anytime you need it. Better still, you only pay interest on the cash you use.
With these features, revolving business lines of credit have become the preferred financing option for most businesses undergoing financial strains due to various business setbacks.
So how does a revolving business line of credit work?
How Does a Revolving Business Line of Credit Work?
A revolving line of credit works almost similarly to a normal business line of credit. However, with a revolving business line of credit, you get access to more funds as you pay down the credit. This is the main difference that keeps the revolving line of credit ideal for businesses.
It works like a personal credit card but on a large scale. You’re given a credit line with a limit, then you borrow any amount of money you need for your business. That’s the difference with other small business loans which require you to take fixed funds depending on your limit.
The credit gives you the freedom to control how to spend your money and when to spend it without much pressure.
After using the funds, you can take back the proceeds in your line of credit to pay off or pay a portion of it. The amount you pay is added to the total and immediately becomes available for you to withdraw.
So the name “revolving” came from the credit cycle of drawing the amount of money you need, using it, payback and it becomes available once again.
And how can you effectively use a revolving LOC?
How Can You Use a Revolving Business Line of Credit?
With a revolving business line of credit, you have access to funds 24/7 because it’s linked to your account. So, you can use the funds regardless of where or when your business needs arise, and there is no limitation to what you use the funds for within your business.
This flexibility of a revolving business line of credit makes it an ideal financing option for all business owners.
Here’s a quick example of how a revolving business LOC works:
Say you own a small cafe famous for its delicious bagels. Then an opportunity to expand your space comes up from the barbershop next door that is abandoned. However, to seize this opportunity you first need these things:
- Additional kitchen equipment and ingredients $100k
- Additional staff $20k per month
- Additional seating and tables for the increased volume of customers costing $10k
But here’s the trouble:
- Even though these are one-time costs to start getting the additional revenues coming in, they’re a lot of extra costs that you just don’t have right now.
- You are considering that it would take another 2-3 years of additional savings to cut out of existing revenue in order to save the needed money.
Because of the drawdown as needed structure you have peace of mind knowing you are in full control of how and when funds are used.
What Are The Business Line of Credit Qualifications?
The eligibility requirements are flexible to enable more businesses to acquire much-needed funds. They include;
- Your business shows the potential for success
- Has been in operation for at least 3 months
- Makes a minimum of $10K monthly gross sales
If your business meets all the above basic qualifications, you have a pretty good chance of getting approved on the same day and funded within 2-3 days.
Now here’s the catch,
Most business owners think they don’t qualify because of the qualifications they DON’T even require:
Below is what you don’t need to get approval.
- Minimum FICO scores
- Any real estate collateral
- Extensive, perfect paperwork and financial histories
Get a REAL Revolving Business Line of Credit
There has been a common trend recently with some lenders promising revolving lines of credit but fail to deliver as expected.
As a business owner, you need to be careful to avoid being scammed by lenders who will offer you business lines of credit with no revolving terms and benefits. To avoid these loopholes, it’s a wise decision to talk to a Funding Specialist and Advisor to walk you through all the terms before applying.
How Long Does it Take to Get a Revolving Business Line of Credit?
It takes as soon as same day approval, and 2-3 days for funding based on good credit.
With a revolving business line of credit, you have access to funds 24/7 because it’s linked to your account. So, you can use the funds depending on where or when your business needs arise.
This flexibility of a revolving business line of credit makes it an ideal financing option for business owners who constantly require capital.
Additionally, if your businesses make regular purchases, the revolving business credit may be the perfect option to get your business the funds needed to expand.