Do you find your business regularly needs access to funds in order to meet short term demands or just requires an immediate cash injection? A business line of credit may bridge the gap.
A line of credit (LOC) is a type of short-term business finance which is similar to a business overdraft.
With a LOC, a business is given an approved amount it can borrow from a lender, which will then be available to use whenever it is needed.
Unlike a business loan, you only pay interest on the amount withdrawn at one time, however a LOC may also include high monthly fees.
A business line of credit:
- is offered by a variety of non-bank lenders
- can be secured or unsecured at different rates
- allows your business to withdraw funds as needed
- requires you to pay interest on the withdrawn amount only
- requires you to apply once only (if approved)
Before you obtain a business line of credit, understand the pros and cons to help you make the right decision for your business.
- Easy application process (by non-bank lenders)
- Fast access to money – funds can be available as fast as one business day
- Interest only incurred on funds borrowed
- Interest rates are generally lower than credit cards
- Quick cash injection
- Draw funds as and when you need them
- If paid back on time and within terms, it can help build a positive credit history
- Interest can add up if you don’t pay down the balance
- Upfront fees to obtain the line of credit
- Higher interest than a traditional loan term
- Not recommend for capital purchases
- Managing ongoing debt repayments if finances are tight
- If it is secured, the collateral used against the debt cannot be sold during the term and could be at risk if the line of credit obligation is not repaid
A business line of credit can be a valuable tool to help business owners finance short-term capital needs and help build a thriving business, ramp up new projects, purchase critical inventory or fill a cash flow gap.
Before you commit to a business LOC, contact us. We can tailor finance options to best suit your business.