BUSINESS LINE OF CREDIT
WHAT IS BUSINESS LINE OF CREDIT?
This refers to an accumulated pool of funds, from which the borrower can borrow a certain amount, as per his requirement and pay interest only the funds drawn. The workings are similar to a credit card working.
Alternatively some funding companies, also offer a Line of Credit fund basis the inventory. In this scenario, the most non-perishable inventory is eligible for the funding.
Like a safety net in practice, Line of credit is available whenever your business requires it, but holds no obligation to use it.
REVOLVING OR NON-REVOLVING BUSINESS LINE OF CREDIT LOAN
Revolving – Similar to a credit card, once the withdrawn funds are paid back to the lender, the total line of credit becomes available to borrow from
Non-Revolving – Unlike the revolving line of credit, in this case, once you have exhausted the limit by borrowing the complete line of credit, you have to re-apply to secure a fresh line of credit.
ADVANTAGES OF BUSINESS LINE OF CREDIT
- Interest is levied only n the amount of actual funds withdrawn
- No hidden fees
- Ready capital availability
- Credit score doesn’t hamper the ability to secure a loan (however rate of interest may be higher for a borrower with a bad credit score)
- Lower interest rates and closing costs than traditional loans
- Turnaround time is much quicker than other funding options
- Lenders offer multiple payment options ranging from daily to weekly to monthly
- Businesses can draw multiple times from within the set line of credit
There are no pre- set criteria to acquire a Business Line of Credit however
a) Credit score of 600 and above is preferred
b) At least 1-year business standing (some lenders consider 6+ months in business)
c) Revenue of 120k and above revenue (varies with various lenders)
ESTIMATED VALUE OF BUSINESS LINE OF CREDIT
Between $10k to $1 million
6 months to 5 years
7% TO 25%
The interest decided takes into account multiple factors such as the business Credit History, Business Standing, Amount of Line of Credit etc,
- Driver’s License
- Voided Business Check
- Bank Statements
- Credit Score
- Outstanding Invoices