The business line of credit allows you to access a pool fund to draw on when you require capital. You can borrow as much as you need, typically between $50,000 and $500,000. Until you tap into the funds, you don’t have to make any payments or pay interest.
A small business credit line can be used to cover cash flow gaps, increase working capital, deal with an emergency or capitalize on a business opportunity.
Lines of credit work in the same way as a credit card. A lender or bank approves you for a certain amount of financing which you can then draw on at your own discretion.
After you have repaid the amount you spent, you are able to continue drawing capital from your credit line. Because you can access it again and again, this type of financing is sometimes called revolving credit.
Small business credit lines that are revolving don’t usually have a term. You can withdraw the funds and repay them indefinitely as long as you prove to your lender that you are responsible borrower. A business line of credit offers many benefits, including the time and energy savings.
While most business credit lines are traditional revolving credit products like business credit, they won’t automatically renew if you have fully paid off what you owe. You may need to reapply for your credit line if you are not revolving lender. Reapplying to your lender should not be difficult if you are in good standing.
There are two types of business credit: short-term and medium-term. These differences can be found in the minimum qualifications, maximum funds, and interest rates.