A Business Line of Credit allows small businesses access to funds when they need them without having to sell any equity or assets. This type of financing is subject to an initial approval process and annual renewal, so be aware that there may be limitations on how much you can borrow.
Does It Cost Anything To Get A Line Of Credit?
Yes, depending on your financial institution there could be fees and / or interest charges. The good news is that this upfront cost will generally be less than other small business loans and it's a one-time charge to get the credit line established and approved.
What Happens If I Make A Late Payment?
That depends on your agreement with your lender, but at most you could lose access to the funds and the rate on your outstanding balance could increase.
How Often Do You Have To Renew A Line Of Credit?
Depending on the lender, you'll have to renew annually, but be aware that it could take months before your credit card comes in the mail for this year's renewal. Because of this, many lenders will allow you access to last year's credit line to use towards the purchase of new inventory.
How Much Would I Borrow?
This depends on your credit rating, which means you should always check your credit before applying for a
. Just like with loans, if you have bad or no credit, then you'll likely get less than if you have good or great credit.
What If I Have An Existing Relationship With My Bank?
If your business already has an existing relationship with your bank, this can be easier to establish than with a new lender who does not know much about you or the risk they are taking on. This could speed up the approval process and save you money on fees.
How Long Does It Take To Get The Money?
Typically, once your application is approved it can take up to two business days for the funds to be deposited into your bank account. This means that you could go from application to cash in hand in as little as five days.
How Does A Business Line Of Credit Compare To Other Loans?
It's a smaller loan, has less interest and can be repaid if your business slows down. In addition, your lender will likely approve a longer repayment period than on other loans.
What Are The Benefits Of A Business Line Of Credit?
Aside from having access to lines of credit when you need them, business owners can rest easy knowing that the approval process is short and they do not have to sacrifice any equity or assets.
If you can establish a great credit score, then you may also receive better interest rates than you would with other small business loans.
Plus, the repayment term is longer giving your business time to turn things around if it does slow down.
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