Lending Library

The first steps in setting up your business can be exciting, and building something from an idea can be transformative. You dream of expansion, yet when you’re ready to take the next steps, you may find yourself unable to move forward due to a lack of capital and staffing bottlenecks.

It’s people that are the beating heart of any business. Yes, exciting and efficient tech has its place, such as onboarding and payroll software, but it’s your staff who implement and drive your company and its brand.

For instance, you might be ready to expand your team to support growth or improve payroll efficiency, but lack the funds to bring in the right expertise. As you remove operational bottlenecks, you may also need to invest in people who can create smoother, more consistent onboarding experiences for new employees.

If you’re at the point where you’re ready to bridge the gap between your ambitions and your current resources, keep reading to learn how a business loan for hiring could help you grow your team.

Why is hiring a strategic investment?

You may find yourself stretched too thin simply because you don’t have enough time or team members to support your growth. This, in turn, limits your bandwidth for strategic work because your focus is distilled. The more you’re able to delegate the operational tasks, such as onboarding, payroll, and so on, the more you can focus on strategic aspects of your business.

In other words, by taking on skilled hires, you’re confidently investing in boosting productivity, sales, and your customer experience. An investment in people facilitated by, for example, a business loan for hiring or a payroll loan,  can bring you long-term returns on your investment (ROI). You’re building a business that not only offers excellent products and services but is also backed up by exceptional talent, creativity, and efficiency.

How business loans can help you grow your team.

There are a number of ways in which your business growth can be boosted. For example:

• Working capital loan: a short-to-medium business loan to fund day-to-day operations and cover immediate cash flow shortfalls
• Term loan: a loan that offers a set amount of money to be repaid by a pre-agreed period of time using regular repayments‍
• Lines of credit: a more flexible option that gives you access to a pre-agreed amount of cash that can be borrowed and repaid multiple times

Any of the above options can be used to fund or create a cushion or financial buffer for expenses incurred during periodic or one-off recruitment drives, subsequent onboarding, and payroll. In addition, you may consider a business loan for any of the following hypothetical hiring scenarios:

• More sales reps to focus on growing the business by entering new markets
• More production staff to meet growing demand
• Install a marketing specialist to raise brand awareness
• New employees for a time-sensitive project

Any of the above can potentially free up leadership time to focus on strategic business development.

The beauty of a business loan is that you have the freedom to use it to cover not only upfront costs but also ongoing expenses, such as employee salaries, benefits, and software tools. Not only that, but the right business loan can give you the space to grow without disrupting your cash flow.

Covering payroll and recruitment costs.

Instead of a long-term business loan, you may benefit from something shorter-term to stabilize payroll during hiring periods or cash flow gaps.

Such a loan might, for example, cover:

• Hiring fees and job postings
• Background checks and onboarding
• Staff training and certifications
• Initial payroll run until revenue generated from hiring increases

The last point is especially significant because time-to-productivity can be weeks to months. For example, explain why this matters: new employees often take weeks or months to become fully productive. A Gallup report suggests that it can take up to 12 months for new hires to become productive.

Choosing the right financing option.

If your priority is to cover immediate hiring or payroll costs, a short-term loan can provide quick access to funds when you need them most. For companies that experience seasonal surges or ongoing recruitment cycles, a business line of credit offers flexibility by allowing you to draw funds as required to manage payroll during busier periods.

When planning for sustained growth and larger-scale hiring, SBA loans (small business loans) are often the most suitable option, offering lower interest rates and longer repayment terms.

Tip: Use cash flow projections to help gauge your repayment capacity. A well-timed loan, aligned with a clear hiring plan, can help your business unlock meaningful growth.

Avoiding common pitfalls.

Before diving in and applying for a hiring loan, it’s essential to avoid common mistakes. These include:

• Overhiring before your revenue justifies the expense
• Not being strategic about hiring, for example, hiring for roles that don’t generate or protect revenue.
• Poor record keeping. It’s essential that you keep detailed and consistent financial records to ensure your loan funds are used responsibly.

In addition, it’s important that you approach a lending institution that meets your needs. For example, According to the FDIC Small Business Lending Survey, 53% of small businesses prefer to apply for a loan online. Yet, only 29% of large banks and 8% of smaller ones have the technology to do this.

When lenders look at small business loan applications, they will assess your application. Strong workforce planning will help lenders see you as a lower risk, thereby improving future financing options.

Long-term payoff: Turning payroll into growth

Instead of viewing hiring as an expense, think of it as an investment in your business’s long-term growth and performance.

For example, imagine a small retail business that takes out a loan to hire a digital marketing manager. Within six months, that new hire drives a 40% increase in online sales through targeted campaigns that build brand visibility and customer engagement.

This hypothetical scenario shows how investing in talent through business financing can create measurable, sustainable growth. Lendio’s mission is to help small business owners turn their ambitions into reality. Start your application today to grow your team and unlock your full potential.

A healthy credit score can open doors for business growth—whether you’re applying for financing, securing better rates, or simply keeping your financial footing strong. But for many small business owners, a less-than-perfect personal credit score can be a major roadblock. 

The good news? It can be improved with time, strategy, and the right steps. We’ll cover what you need to know to improve your credit, and offer you tips on what high-impact moves you can make to start boosting your credit score today.

Do personal credit scores impact business credit scores?

Personal credit scores do affect your business credit, especially early on. Many lenders use your personal credit to evaluate your ability to manage debt, and in some cases, they’ll require a personal guarantee. That means your business's financial behavior can also impact your personal credit.

As your business matures, strong business credit habits (like on-time payments and positive tradelines) reduce the weight of your personal score. You should always expect that small business lenders will check your personal credit score on loan applications, though, so it’s important not to lose sight of maintaining your personal credit health.

Want to learn more about personal credit scores vs. business credit scores? Read our guide.

Set realistic expectations about increasing your credit score fast 

If you find yourself sitting in front of Google, searching “how do I raise my credit score in 30 days,” you’re not alone. Wanting to improve your credit score quickly in order to continue with your business goals is common. However, you will only become more frustrated if you have unrealistic expectations. There are often no overnight miracles when it comes to boosting your credit score. Many of the factors that determine your credit score rely on historical data. For example, payment history scoring can only improve with time.

However, there are strategic moves you can make over 3, 6, and 12 months that will create a noticeable bump in your overall personal credit score. By focusing more narrowly on high-impact changes to the factors that weigh heavily on your credit score, you can see noticeable improvements within 6 months.

Your starting credit score matters

Another factor to consider in how fast your credit score can improve is the score you’re starting with. Credit score ranges will have an impact on how fast your credit score can realistically improve in a short window.

If your score starts in the low 500s, aggressive action—like reducing debt and fixing errors—can lead to 50–100 point gains within six months. If you’re starting in the 600–700s, changes may be more gradual (e.g., 20–50 points) as your profile nears the top tier.

We’ll break down some realistic moves to improve your credit score fast in the next section.

Your timeline to better credit: what to do in the next 3, 6, and 12 months

If your goal is to boost your credit score quickly, you’ll want to start with the actions that will have the most impact based on how credit scores are calculated and your starting credit score.

What to focus on in the first 3 months

At this stage, focus on quick wins that move the needle fast: reduce utilization, make consistent payments, and correct any errors.

What to focus on in the next 6 months

At this stage, you can build on your previous moves by introducing new strategies to build depth and a healthy mix into your credit profile.

What to focus on in the next 12 months

At this stage, you will focus on long-term gains through consistency and diversification.

Assuming you take these actions at each stage of the timeline, and then continue applying best practices from each stage while building on the prior period's progress, these are the score improvements you might see after 12 months.

7 ways to improve your credit score

Regardless of your credit score or desired timeline for improvement, these tactical tips will help you improve your credit score, especially when combined consistently over time.

1. Pay every bill on time

Impacts: Payment History (35%)

Payment history is the single most important factor in your credit score. It shows that you can handle debt and be trusted to pay it back. When you miss payments by 30+ days, whether it’s a credit card, utility bill, or loan, it can have a negative effect on your credit report for 7 years, depressing your score. Paying your bills on time is by far the best thing you can do to rebuild less-than-stellar credit.

Tip: Set up automatic payments or calendar reminder alerts for minimums. Even one missed payment can cost you a lot of points if your score is already struggling.

2. Keep credit card balances below 10% of your limit

Impacts: Credit Utilization (30%)

While 30% is commonly advised, 10% or lower is the real sweet spot. Anything above 10% will chip away at that 30% of the overall credit score affected by credit cards:

• A 10−30% balance takes away up to 10%
• A 30–50% balance takes away 10−25%
• A 50−90% balance takes away 25–90%

Tip: If your card has a $5,000 limit, aim to keep the balance under $500 at any point in the billing cycle. This is because credit utilization resets monthly. A high balance—even if paid off later—can spike your usage rate temporarily and drag your score down.

What if you don’t have an active credit card?

Without recent revolving credit, you may be missing a huge portion of your score potential. If you’re consistently at a 0–7% balance-to-limit ratio, credit models may read that as inactive usage, not responsible credit behavior. 

Additionally, it may be one of the best tools available for building a strong credit history, which is essential for achieving your business goals, such as securing financing.

If you're hesitant to open a new credit card, but need to make improvements to

your business and personal credit—consider a tool like the Nav Prime Card.

The Nav Prime Card¹ is designed to help small business owners build business credit history (it can also report to your personal credit), without the downsides of traditional cards, such as high credit score requirements. You can:

• Spend: Use it on regular business expenses
• Pay: Can be set to automatically repay daily from your linked account (0% APR, no carryover balance)
• Build: It is submitted to Dun & Bradstreet, Equifax, and Experian, helping you build business credit history. You can also sign up for personal credit reporting.
• Repeat: Use it consistently, pay on time, and monitor progress in Nav’s Credit Health dashboard

Because the Nav Prime Card functions like a charge card, not a revolving credit card, you get the benefit of active credit reporting, without the risk of carrying debt.

Learn more about the Nav Prime Card.

3. Become an authorized user on someone's good account

Impacts: Length of Credit History (15%) + Credit Mix (10%)

Piggybacking on a well-managed, older account can give your score a boost, especially if your credit profile is thin or new. Have someone you know, such as a spouse or a family member, add you as an authorized user of their credit card. You’d have to ask the person to do this, and if they agree, they would add you, receive the credit card in your name linked to their account, and pass it off to you.

Some things to keep in mind: Just as you will benefit from the person’s good habits, that person can take a credit hit if you abuse the authorization you’ve been given, so treat it with respect (remember, they're still on the line for all charges). And don’t get yourself authorized on too many accounts. Credit agencies will flag that as you artificially raising your score.

Tip:  Make sure the account has low balance and a long positive payment history. And it goes without saying, only piggyback with someone you trust, and who trusts you.

4. Dispute any errors on your credit report

Impacts: All score factors (depending on nature of errors)

According to the Fair Credit Reporting Act, your credit agency is required to show you your credit report at least once a year at no charge. Take full advantage of that right.

You may have credit dings you don’t know about or that don’t belong on your credit report. You have the right to challenge them and request they be removed. 

Tip: Go through your credit report each year— and be thorough. Even a few inconsistencies can add up quickly and could be the difference between a red flag and a green light for funding.

5. Use existing accounts strategically

Impacts: Credit Mix (10%), Credit Utilization (30%), Credit History (15%)

Using dormant lines (like a personal line of credit or store card) can show active, responsible credit behavior—without opening new accounts.

Your credit history is an average of all your open and active credit accounts. A good credit history with credit—any credit—can positively impact your score. If you have a line of credit that you've not used, consider paying expected expenses with it and then paying back the line of credit with the money you already put aside in your checking account to pay those bills.

Do: Make small, recurring charges on your older cards to keep them active

‍Don’t: Open a new card just to get a discount or points. It lowers the average age of your accounts and causes a hard inquiry.

6. Limit hard credit inquiries

Impacts: New Credit (10%)

Applying for multiple credit cards or loans in a short period can lower your score—especially if you’re already rebuilding.

If you're thinking about applying for a new card and maintaining a low balance, proceed with caution: you won't want to apply for a lot of new credit at the same time. The reason for this has to do with “credit inquiries” or "credit checks" (also called a "credit pull"), which is the term used when a lender, broker, partner, or vendor checks your credit score.

A “hard inquiry” is what you want to avoid when trying to rebuild credit because each one negatively impacts your credit score. The less credit you apply for, the fewer hard inquiries your credit score will show.

Tip: Be strategic. Rate shop within 14–45 days if applying for loans (FICO treats this as one inquiry). Otherwise, space out applications and avoid “just browsing” preapprovals that trigger hard pulls.

7. Avoid spending behavior that signals risk

Impacts: Lender perception and soft underwriting

Some lenders use algorithms that analyze changes in your spending behavior. Large purchases (weddings, legal fees), sudden drop in payments, or maxing out credit cards can be red flags even if you pay on time.

Tip: Keep consistent, modest usage. Avoid signalling financial instability when you’re rebuilding credit.

Key Takeaways: How to Improve Your Credit Score

• Focus on what matters most. Your payment history and credit utilization make up 65% of your credit score—prioritize on-time payments and keeping balances low.
• Start where you are. The lower your starting score, the more dramatic gains you may see early on. But everyone benefits from consistent credit-building habits over time.
• Think in timelines, not overnight fixes. Small, strategic moves over 3, 6, and 12 months can lead to meaningful credit improvements—especially if you keep building on what’s working.
• Use the right tools. Solutions like the Nav Prime Card can help you work on your personal and business credit history simultaneously, without debt or hard inquiries.
• Stay consistent. Credit improvement is a marathon, not a sprint. Monitor your progress, avoid setbacks, and stay focused on long-term financial health.

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If you’ve taken on debt for your small business, you’re not alone. The latest Small Business Credit Survey found that roughly 87% of small businesses rely on financing—either loans or credit cards.

Debt can be necessary at times, but high interest rates can cut into your monthly profits. Having to juggle multiple payment dates can also be stressful, sometimes overwhelmingly so. With an SBA loan, small business owners can refinance their existing debts to simplify repayment and lower interest rates, turning financial strain into long-term stability.

Why refinancing makes sense for small businesses.

Whether you’re just starting or you’ve been in business for a while, refinancing your high-interest debts can be a smart move. That’s because interest charges can eat into operating margins, especially for businesses that rely on expensive financing options like:

• Revenue-based financing—Might have anywhere from a 40% to a 350% equivalent rate‍
• Business credit cards—Tend to have high rates, with some lenders offering between 15% and 26% APR

With interest rates expected to remain elevated, small business owners are increasingly turning to SBA funding for relief. So far this year, the SBA has provided financing to nearly 80,000 small businesses via 7(a) and 504 loans with a total approval amount of $37 billion (including both financing and refinancing).

Here’s why refinancing with an SBA loan might make sense for your small business:

• You could get a lower rate—This means less money spent on interest payments
• It lowers your monthly payments—A lower rate or a longer repayment term could mean smaller monthly payments
• It improves cash flow—The less you spend on your debts, the more cash you’ll have to maintain or expand your venture
• Payments are easier to manage—Refinancing can consolidate business debts into one simply monthly payment for easier bookkeeping

How SBA loans work for refinancing.

SBA loans are business loans that are partially backed by the U.S. Small Business Administration. The SBA guarantees a certain percentage of these loans (between 50% and 90%), making them easier to get than other commercial financing. Rates and terms may also be more favorable.

SBA loans can be used to consolidate business debt or refinance existing loans, provided certain requirements are met. Common criteria include:

• 165 minimum FICO Small Business Scoring Service (SBSS)
• 650 minimum credit score
• 2+ years in business
• Sufficient revenue (varies)

The SBA has multiple programs for small businesses, but two of the most popular refinancing options are:

• SBA 7(a) loans—The SBA’s most flexible loan program, SBA 7(a) loans, are often used to refinance multiple high-interest debts or commercial real estate loans‍
• 504 loans—These loans are typically used to consolidate or refinance qualified debt, including fixed-asset loans like equipment or commercial real estate

Standard 7(a) loans range from $350,001 to $5 million and come with 10-year repayment terms (or 25 years for real estate refinancing). SBA loan interest rates may be fixed or variable, and the maximum variable rate is set every month according to the Wall Street Journal Prime Rate. Visit our quick guide for the most current SBA interest rates.

Repayment terms for 504 loans are also 10 to 25 years. Interest rates are fixed. Most loans cap out at $5.5 million, but may require up to a 10% down payment.

Before offering an SBA loan refinance, lenders must ensure it will improve your financial position. The new loan must get you a lower interest rate, a longer repayment term, or both.

You may need to meet other criteria, too. Say you want to refinance an installment loan with an SBA 504 loan. At least 75% of your original debt must have been used to purchase major equipment or commercial real estate. Verify any lender’s requirements before you apply.

Key benefits of SBA loan refinancing.

Refinancing business debt with an SBA loan comes with many benefits, like:

• Lower interest rates—SBA loans often offer rates several points below traditional loans or merchant cash advances
• Extended repayment terms—Spread payments over 10 to 25 years to improve cash flow for expansion or other operating costs
• Single, simplified payments—Consolidate multiple debts into one predictable monthly payment
• Improved credit profile—Consistent, on-time payments can help rebuild business credit

Take a restaurant owner who has the following business debts:

• $50,000 installment loan with an 18% interest rate, five-year term, and $1,189 monthly payment
• $30,000 equipment loan with a 15% interest rate, three-year term, and $1,040 monthly payment
• $40,000 installment loan with a 14% interest rate, four-year term, and $1,093 monthly payment

The total monthly payment is $3,322.

If the restaurant owner takes out a $120,000 SBA loan with a 12% interest rate and a five-year term, they could use it to consolidate all three debts and reduce their monthly payment to $2,669.

Eligibility and requirements for SBA loan refinancing.

For an SBA loan refinance, you’ll typically need:

• To be operating a U.S.-based, for-profit business
• A business in good standing with reasonable credit history (personal and business)
• To meet the SBA’s size requirements
• A demonstrated ability to repay the loan

For refinancing, the existing debt must have been used for business purposes and originally structured on reasonable terms. Both the SBA and the lender will review your financials, tax returns, and business debt schedules.

Here’s a tip: Organize your documents early to speed up approval and demonstrate responsible financial management.

How to start the SBA loan refinance process.

Thinking about refinancing with an SBA loan? These are the general steps:

1. Review all current debts, rates, and balances.
2. Calculate potential savings from lower rates and longer terms.
3. Work with a marketplace like Lendio to compare SBA lenders and programs.
4. Make sure your business (and debts) meet any specific qualifications to refinance.
5. Prepare documentation (financial statements, tax returns, debt schedules).
6. Apply and wait for a decision.

Ready to get started? Find the refinancing you need on Lendio’s marketplace today.

Finding funding for a small business often requires balancing opportunity with risk. One example of this type of tradeoff often happens when you apply for a business line of credit and encounter a requirement for a personal guarantee.

Lenders frequently use personal guarantees as a safety net when extending unsecured lines of credit or small business loans. When you sign one, you agree to personally repay a debt if your company falls behind on its financial commitment. 

It’s important to understand the responsibility that a personal guarantee involves and what could happen to your personal assets if anything goes wrong. Read on to learn how personal guarantees work, why lenders require them, and whether it’s possible to secure a business line of credit without one.

Reasons a lender might require a personal guarantee for a business line of credit.

Lenders use personal guarantees to reduce their risk when they issue business lines of credit or business loans (especially to startups or smaller businesses). A personal guarantee helps reassure the lender that someone will take responsibility for the debt if the business defaults. 

Here are a few situations where lenders typically ask for a personal guarantee on a business line of credit.

1. The business lacks established credit history.

Newer companies often lack well-established business credit. So, it can be harder to qualify for startup business lines of credit (though not necessarily impossible). When your business credit profile is thin or nonexistent, lenders may rely on your personal credit as a backup (also known as a compensating factor). A personal guarantee may also give lenders added confidence that you’re invested in repaying the money your business borrows.

2. The business credit line is unsecured.

If you apply for an unsecured business line of credit, it means you won’t provide the lender with any collateral such as real estate, equipment, or inventory to back the funds your company borrows. As a result, the lender carries more risk than it would if you applied for a secured business line of credit. To offset this added risk, the lender may ask for a personal guarantee to help protect its financial interests against the possibility of default.

3. The lender has strict guidelines.

Banks and credit unions often have tighter borrowing requirements compared to online lenders when you apply for a business line of credit or other financing. Even if your business shows solid revenue, traditional lenders might still require a personal guarantee until your company builds a lengthier credit history, stronger financial records, or more collateral.

What is a personal guarantee and how does it apply to business credit?

A personal guarantee is a legal promise that a business owner (or owners) will repay a financial obligation if their company fails to do so. When you sign a personal guarantee, you’re essentially co-signing a business debt. It’s a legal commitment that lets a lender pursue your personal assets (e.g., savings accounts, property, etc.) if your business defaults. 

Personal guarantee requirements are more common with unsecured lines of credit. With this type of financing, the guarantee often serves as the lender’s only protection against nonpayment. In some cases, lenders may still request a personal guarantee for secured business credit lines even though the collateral already reduces the lender’s risk.

As a business owner, the key takeaway is that signing a personal guarantee ties your personal and business finances together. It can open doors to funding you might not be able to access otherwise, but it exposes your personal wealth to potential loss if your business struggles.

Key factors that influence lender requirements.

Personal guarantees are common with business lines of credit, but not universal. Still, the higher a lender perceives your risk to be, the more likely you are to see a personal guarantee requirement, higher interest rates, lower credit limits, or all three.

Below are some common factors lenders consider when setting borrowing terms.

Time in business

Lenders are typically more comfortable extending credit to businesses that have operated for at least two years. In general, startups and newer businesses have higher risk profiles, and that could increase the likelihood of a personal guarantee requirement.

Business revenue and cash flow

A healthy, consistent cash flow may demonstrate strong repayment ability. Stronger revenue and positive cash flow might make some businesses eligible for lower interest rates, higher credit limits, or a smaller personal guarantee.

Credit scores (business and personal)

Higher business credit and personal credit scores may reduce perceived risk. But if your credit history shows missed payments or high debt, a lender may require a personal guarantee or charge a higher interest rate on your credit line.

Lender type and risk tolerance

Where you apply for a business line of credit also influences the borrowing requirements you encounter. Online lenders with more flexible criteria may offer business credit lines with lower documentation requirements (and, occasionally, limited or no guarantees). Banks and credit unions, however, often insist on personal guarantees—even for well-established businesses.

How personal guarantees affect borrowers and business owners.

Personal guarantees can help small business owners access the funding they need, but they also raise the stakes. It’s important to understand the tradeoffs upfront. 

If you sign a personal guarantee

You’ll likely enjoy easier approval odds and possibly a lower interest rate, since you’re reducing the lender’s risk. At the same time, you take on full personal liability if your business defaults. Your personal assets (e.g., bank accounts, investments, property, etc.) could be on the line to repay the debt. 

If you don’t sign a personal guarantee

Without a personal guarantee, lenders must rely solely on your business’ creditworthiness and any collateral you provide. As a tradeoff, you may face stricter eligibility requirements, smaller credit limits, or higher interest rates. Some lenders might decline your application altogether if the business appears too risky.  

Options for securing a business line of credit without a personal guarantee.

A personal guarantee requirement is common when you apply for a new business credit line. Still, you can sometimes find financing options with a reduced guarantee or, in rare cases, no guarantee. Below are a few solutions to consider.

Secured business line of credit

With a secured credit line, the business pledges collateral like equipment, receivables, or real estate to back the money it borrows. Because the lender can claim those assets if the business doesn’t repay, the lender may sometimes reduce or remove personal guarantee requirements.

You accept the risk of losing business assets. However, you may protect your personal finances and credit in the process. 

Alternative financing solutions

Some funding products give you access to capital without (or with less) personal guarantee exposure. They’re not always cheaper, but they shift your risk exposure. 

• Revenue-based financing: Some alternative funders advance cash in exchange for a portion of future sales or bank deposits. These options usually cost more than traditional credit lines, and repayment terms may be daily or weekly. But they might not require a full personal guarantee, especially for businesses with strong incoming revenue.
  
  
• Invoice financing: With invoice financing (also called accounts receivable financing), you use unpaid invoices as collateral. The financing company advances you a portion of your outstanding invoices now, then collects repayment (plus fees) when your customers pay. The invoices act as repayment security, so you may not face a full personal guarantee requirement like you typically see with an unsecured revolving credit line.
• Grants: Business grants (including some SBA grants and local development grants) don’t require repayment or a personal guarantee. Yet although these funding solutions are attractive, they can be competitive, slow, and restricted to specific industries or uses.

Some business lines of credit and business loans almost always require a personal guarantee, especially from small businesses and startups. For example, many SBA loans require personal guarantees from any owner with a significant stake in the company. Even though SBA programs support small business owners, lenders still want a path to recovery if the business fails to repay its debt.

Eligibility requirements and application considerations.

Every lender is different. Yet before you can qualify for a business line of credit, you’ll typically need to meet some basic lender requirements. 

• Credit history and score (business and personal): Lenders consider both business and personal credit. A minimum personal credit score of 600 or higher is a common requirement, and many lenders also want to see on-time payment history and well-managed debt levels.
• Annual revenue and monthly cash flow: Lenders review your deposits and cash flow to confirm the business has the capacity to repay. Consistent monthly revenue (often around $8,000 or more) may improve approval odds or help you qualify for better pricing.
• Time in business: More time in operation can reduce lender risk. Companies with two years or more in business tend to face fewer personal guarantee requirements than brand-new startups.‍
• Collateral: If you can secure a credit line with collateral, you may have more negotiating room where a personal guarantee is concerned.

If you want to improve your chances of qualifying for a credit line (or a competitive offer), make sure your company’s financial statements are organized and up to date. A strong credit profile also helps, and an existing lender relationship might come in handy in certain situations. 

How to strengthen your profile to reduce or avoid personal guarantee requirements.

Personal guarantees are common with business credit lines, especially for smaller businesses. Yet if your goal is to reduce or avoid this requirement, the following tips may help. 

1. Build strong business credit

Establishing good business credit scores is a smart move for many reasons. You can start building business credit by opening accounts under your company’s name (e.g., vendor credit lines, business credit cards, etc.) and paying them on time or, better yet, early.

2. Improve financial stability

Lenders want proof that your company is financially capable of repaying its debts. As a result, maintaining positive cash flow, managing debt responsibly, and reinvesting in your company’s growth are three practices that can work in your company’s favor and support long-term business health. 

3. Strengthen financial documentation

Make a habit of maintaining detailed financial statements, cash flow projections, a business plan, and proof of consistent revenue. The stronger your business financial statements look, the better your chances of qualifying for funding when you need it.

4. Offer collateral

A secured credit line uses assets like equipment or real estate as security in place of (or alongside) a personal guarantee. With this arrangement, you still risk losing business property in a default, but personal assets stay more protected.

5. Negotiate terms

If avoiding a personal guarantee (or reducing a guarantee requirement) matters to you, you might be able to negotiate financing terms with the lender. Consider improving your borrower profile to put yourself in a better position first. Next, shop around for multiple financing offers. From there, you can make specific requests about the terms you’d like to change (personal guarantee or otherwise) to see if the lender is willing to adjust the offer.

When to consider a co-signer or collateral.

If a lender insists on a personal guarantee for a business line of credit and you don’t want full personal liability, you still have options. Below are a few to consider. 

Bring in a co-signer or additional guarantor

A co-signer with strong personal credit can help spread the lender’s risk across more than one person. This structure might help you qualify when you might otherwise struggle on your own.

Bringing in a co-signer or additional guarantor could also help disperse the burden of liability if your business defaults on its debt. If something goes wrong, the lender has multiple guarantors to seek repayment from instead of the full repayment responsibility falling on a single owner. 

Offer collateral instead of (or in addition to) a guarantee

Depending on the lender and the financing offer, you can sometimes negotiate a smaller personal guarantee if you secure the credit line with business collateral. In this scenario, the collateral becomes the lender’s first path to recovery if a default occurs. From there, your personal guarantee (if applicable) backs up any remaining shortfall. This setup can help protect personal assets while still moving the approval process forward. 

Final thoughts: Balancing risk and access

For small business owners, a personal guarantee may unlock access to critical financing opportunities your company needs to thrive and grow. Signing a personal guarantee could help you qualify for a business line of credit before your company has a lengthy credit history, strong assets, or years of financial statements under its belt.

But a personal guarantee also exposes you as a business owner. You take on personal liability for business debt. You accept risk to your personal assets and credit if the business fails to repay its debt as promised.

That doesn’t mean you should never sign a personal guarantee. But you should treat the commitment like any other high-impact financial decision. Understand the obligation, know what the lender can require if your business defaults, and build a plan to move away from personal guarantees as your business becomes more established.You can explore secured and unsecured business line of credit options, along with other business funding solutions, through the Lendio marketplace. Research to find which financing solutions make the most sense for your business goals.

What’s a business owner to do when their equipment breaks down or becomes obsolete? You could spend money on costly repairs or take this opportunity to invest in machinery that meets your changing business needs.

There’s no denying how expensive new equipment can be, and that’s where equipment financing can really save the day. Today’s business equipment loans not only help you stay on track, but they can position you to invest in strategic upgrades without draining your cash reserves.

Why equipment upgrades drive growth.

Businesses face increasing challenges due to rising materials costs and customer demand for bigger and better experiences. If your equipment can’t keep up, you may disappoint buyers.

A coffee house, for example, could continue ordering parts for a 10-year-old espresso machine.

However, just one day waiting for that part could reduce sales during the busy holiday season, and doesn’t guarantee that another part won’t break soon after. It may even be difficult to find someone to fix older machines, and they often lack the intuitive technology that churns out better brews in less time for a more discerning modern customer base.

Compare that to getting a new, energy-efficient espresso machine with more brewing varieties. Not only does it churn out drinks during your busiest days, but it can keep employees happy as they use equipment that actually makes their jobs easier (and fun!) Parts are likely readily available and may be covered under new equipment warranties and repair plans.

How equipment financing works.

The basic idea of equipment financing can be similar to a traditional term loan in that the borrower applies for a loan to purchase the equipment and begin using it right away. This loan, however, only applies to the purchase of equipment or machinery; funds can’t be used to cover payroll or pay off bad debts, for example.

The equipment becomes the collateral. It secures the loan and ensures the borrower repays the debt. If the borrower gets behind on payments or defaults, the lender can use the equipment to recoup costs. This collateral is a mechanism to reduce lender risk and make more borrowers eligible for financing.

Because the loan is only for equipment, it may require a smaller down payment and often comes with predictable monthly payments that small businesses can easily plan into their budget. There are no surprise balloon payments, and businesses know how many payments they have left to make at any time.

Each lender has its own equipment financing options, which may include:

• Equipment leasing, where a borrower can choose to keep or upgrade their equipment at the end of the repayment term
• Standard term loan, where the borrower owns the title to the equipment while they pay, but the lender has an interest in the equipment
• Line of credit, which can be used in amounts as big or small as needed to keep equipment maintained over time
• SBA loans, which may be larger and cover more expensive machinery upgrades

Equipment financing can be used for new or used equipment, software, and machinery, depending on each lender’s requirements.

When to consider a business equipment loan.

If your equipment is so outdated that a breakdown is imminent, it may make sense to be proactive and purchase newer equipment before you lose even a day of business. Other scenarios could include:

• When repairs cost more than new equipment, in either replacement parts or specialized labor
• When outdated technology no longer meets your changing business needs or can’t remain compliant with new industry rules or regulations
• When your business growth requires expansion in size, number, or scope of your machines
• When equipment allows you to beat your competitors to a new market or capitalize on demonstrated interest from your existing customer base

Evaluating ROI on equipment upgrades.

Try to avoid the “sunk cost fallacy” with regard to your machines. This is a way of thinking where you may be reluctant to abandon old machinery because you’ve already spent so much to keep it running (even if you could easily save money by switching to new equipment).

Instead, calculate the ROI when possible:

1. Estimate how much you’ll save and any new earnings from the new machinery.
2. Compare it to the total loan cost, including interest and fees.‍
3. Calculate how long it will take for you to pay back the equipment loan before you achieve profitability.

This ROI can tell you if you’re better off buying new equipment now or later. Don’t forget to include any tax benefits, such as Section 179 deductions for writing off the full purchase price of qualifying equipment. Financed equipment still counts for this benefit, even with depreciation. (Consult a qualified tax professional for personalized guidance and to maximize savings for your unique loan situation.)

Choosing and applying for the right equipment financing.

Consider these questions to help you pick the right financing:

• Do you need only financing for machinery and tech? You may be right for a standard equipment loan.
• Will you need to borrow again and again? A line of credit could suit you well.
• Do you favor long terms, lower rates, and larger amounts? An SBA loan may cover what you need.
  

Applying for any of these options can be as easy as following these steps:

1. Get quotes for the equipment that will best help you grow and stay competitive.
2. Gather financial statements that demonstrate your creditworthiness, including tax returns, profit and loss statements, and forecast reports.
3. Visit Lendio and submit one easy application in minutes.
4. Compare offers from 75+ vendors to find the best fit for your needs.
5. Select the right option and secure funding in weeks (not months).
6. Buy the equipment you need to boost your business!

While your equipment needs may be complicated, securing funding doesn’t have to be. Lendio simplifies financing to keep you running at peak capacity, any time of year.

From buildouts and equipment to software and payroll, dental and medical startup costs can quickly climb to six figures. And that’s just to get through the first few months.

The right financing can help cover those expenses, giving you time to find your footing and room to grow. It starts with understanding the types of loans available to healthcare professionals without practice revenue, learning how to qualify, and avoiding common cash flow mistakes that can derail your practice in its first year.

Typical startup costs for new medical practices.

Depending on your specialty, location, and growth plans, your total startup costs could range from $100,000 to $500,000 or more. Some of the most common medical startup expenses include:

• Office lease and buildout: Securing a space is often the largest startup expense. It may include costs such as security deposits, upfront rent, interior construction, and medical-grade flooring.
• Medical and diagnostic equipment: Making a practice patient-ready requires investments in equipment such as imaging machines, exam chairs, and sterilization tools, as well as basic items like gloves, stethoscopes, and blood pressure cuffs.
• IT systems and EHR software: Modern medical practices require advanced technology systems. Startups need to purchase computers, networking hardware, and the subscription, implementation, and training fees for an electronic health record (EHR) system.
• Licensing, insurance, and credentialing: This covers business licenses, malpractice insurance, facility insurance, and the costs associated with the provider credentialing process.‍
• Payroll for core staff: You’ll need to hire and pay a core team, such as a medical assistant, receptionist, and office manager, for at least a few weeks before the practice opens. These positions are critical for effective pre-launch setup and organization.

Securing sufficient financing well ahead of your launch may help preserve your personal finances while giving you the funding needed to give your practice a strong start.

Common types of medical practice loans.

Without revenue or financial history, securing a traditional small business loan may be a challenge. However, the following loans are commonly used to support new medical practices during their launch phase.

Healthcare startup loans.

Designed for zero-revenue operations, healthcare startup loans offer funding for anything from practice buildouts to working capital. They often provide 100% financing and offer favorable terms.

Equipment financing.

When you need to purchase major medical machinery, diagnostic tools, or office technology, equipment financing may be the right solution. These loans use equipment as collateral, often resulting in lower interest rates and small to no down payment requirements.

SBA loans.

These government-backed loans offer lower down payments, favorable rates, and longer repayment terms (up to 25 years for real estate). SBA loans are often used for larger funding needs, such as major practice buildouts or real estate purchases.

Business line of credit.

A startup business line of credit provides flexible access to cash. Since you only pay interest on the funds you use, it often acts as a cushion for temporary shortfalls, such as unexpected inventory needs, payroll, or operational expenses.

How to qualify for a medical startup loan.

When applying for a medical startup loan, lenders typically closely examine your personal financials, credit history, and how well-prepared you are for the launch. These key factors may strengthen your application:

• Personal credit score: Since the business has no credit history, the borrower’s personal credit score becomes a primary decision factor. A strong score indicates financial responsibility, which may make it easier to get approved and secure competitive interest rates.
• Business plan and projections: Presenting your lender with a detailed startup plan based on conservative projections shows that you’ve thought through the numbers and have a plan to repay the loan.
• Industry experience: Credentials, licensing, and work history assure the lender that your practice is legitimate and positioned to start earning revenue.‍
• Cash reserves or collateral: Some medical startup loans offer 100% financing, but having personal capital to contribute or offering sufficient collateral may help you secure better terms, especially for non-SBA loans.

Showing lenders that you’re organized, strategic, and financially disciplined may improve your odds of getting funded. A financial advisor specializing in healthcare may help you refine your projections or suggest other options for strengthening your financial position. If you have little to no credit history or high student loan debt, consider seeking a cosigner with strong personal financials.

Managing cash flow in your first year.

The first 12 months for a medical startup are often the most financially challenging. Even a well-run practice that appears profitable on paper can feel the pinch when faced with delayed insurance reimbursements, unexpected expenses, and slower-than-expected patient volume.

When used strategically, medical startup financing can help cover operating costs and working capital needs. Set aside enough funding to cover three to six months of fixed expenses and don’t skimp on marketing during this critical time. Remember that patient acquisition takes time, and cutting back on your visibility may extend the time it takes to start turning a profit.

Evaluating Return on Investment (ROI)

Think of your medical practice loan as an investment rather than a cost. Taking this approach may help create long-term, sustainable profitability.  

To measure its return, start by comparing the cost of your loan to projected revenue growth. Then, estimate how long it will take to break even. Don’t forget to consider intangible returns such as improved patient access, operational stability, or stronger brand trust.

Avoid these startup financing mistakes.

Many new medical entrepreneurs are so focused on getting approved for a loan, they get tripped up by other financial and strategic errors. As you prepare for your launch, be aware of these common pitfalls:

• Underestimating startup costs: Build a contingency fund (approximately 20-30% of total estimated costs) into your financing request.
• Taking on too much debt without a repayment plan: Borrow no more than what you can comfortably pay back based on conservative financial projections.
• Neglecting marketing or patient acquisition costs: Allocate sufficient funds to digital marketing, local outreach, and referral networking. This is critical for growing a patient base, especially in your first year.‍
• Overinvesting in non-essential equipment at launch: In your first year, avoid investing in high-end office furniture, specialty equipment, or other items that aren’t strictly required for quality patient care.

To create a solid financial foundation, focus on strategic, phased spending that’s aligned with patient growth.

Lendio simplifies medical practice financing.

Starting a new medical practice requires strategic planning and the right financial partner. Lendio simplifies the funding process, connecting healthcare professionals with 75+ lenders and loans designed specifically for medical startup companies.

Compare loan options side-by-side, explore offers aligned with your medical specialty, and find the medical practice loan that’s right for your needs with one simple application.

Opening a new clinic, buying diagnostic tools, or hiring additional staff can easily cost six figures. But healthcare businesses have a significant advantage. Since many medical practices have consistent demand and predictable reimbursement models, lenders often view them as lower-risk borrowers.

A small business loan designed for medical professionals may offer more favorable terms, longer repayment periods, and funding amounts that align with your growth goals.

When to consider a healthcare business loan.

A healthcare business loan might be the right move if you’re planning for growth or need to stabilize cash flow. Common scenarios include:

• Expanding or relocating your medical office: Buying real estate or financing major buildouts or extensive renovations.
• Purchasing medical equipment: Financing revenue-generating assets such as surgical robots, MRI machines, dental chairs, ultrasound systems, or advanced diagnostic tools.
• Updating systems and technology: Modernizing patient management software, Electronic Health Record (EHR) systems, or specialized billing platforms.
• Managing temporary cash flow disruptions: Covering gaps in working capital, particularly those caused by seasonal slowdowns or delayed insurance reimbursements.
• Supporting acquisitions or mergers: Purchasing another practice, merging with partners, or covering transition costs.

While a healthcare business loan can be a financial safety net, many forward-thinking medical professionals use it as a proactive tool to fuel growth. When used strategically, the funds may help improve efficiency, expand patient capacity, and make your practice more competitive.

Loan options for medical professionals.

Medical professionals typically have access to several types of small business loans. The right option for your needs depends on several factors, including how quickly you need funding, what you need it for, and how much time you need to repay it.  Here are some of the most common medical financing structures.

A reputable lending marketplace, like Lendio, can help you compare healthcare loan options side-by-side and connect you with lenders who understand the cash flow patterns of medical practices.

How to qualify for medical office financing.

A healthcare business may already have a small edge when it comes to getting a small business loan, but your practice still needs to meet specific requirements. When evaluating applications for a medical practice loan, lenders typically look for:

• Strong credit score and financial history: Lenders may check both your personal and business credit scores to verify that you have a solid history of managing debt responsibly.
• Reliable income or contracts: Steady patient volume or stable contracts with major insurers help to prove your practice generates consistent income.
• Business plan and projections: Newer practices may need to provide a detailed business plan with conservative revenue and expense projections.
• Financial statements: Established practices typically must provide current financial statements to prove profitability.‍
• Industry experience and professional licensing: Licenses, certifications, and time in the field help demonstrate your practice’s long-term viability.

Quick Tip: Having well-documented patient volume data and clear expense tracking may strengthen your application, particularly if you’re applying during a period of growth or transition.

Smart borrowing strategies.

The right strategic decisions can turn a medical practice loan into an investment tool that supports your long-term growth. Use these tips to help ensure your loan strengthens your practice without creating unnecessary financial pressure.

Borrow based on need.

Start with a clear estimate of how much you’ll need to achieve your goal. It’s reasonable to include a small buffer for unexpected costs, but if the lender offers significantly more than planned, think twice. Taking on extra debt may lead to higher monthly payments and unnecessary interest charges.

Match loan terms to asset lifespans.

Make sure you’re not paying for an asset beyond its useful lifetime. Secure shorter-term financing, such as a line of credit, for consumables or short-term working capital. Reserve longer-term financing for assets that match or exceed the repayment period, such as real estate or major equipment.

Maintain a strong cash reserve.

Even if your medical practice has reliable income, unexpected expenses or insurance delays could create a gap in cash flow. Before taking on a small business loan, you might consider setting aside three to six months of cash reserves. This can help create the flexibility to manage loan payments during lean times without dipping into funds needed for your daily operations.

Understand your loans repayment terms.

Carefully read the details before signing a loan agreement. Make sure you understand the interest structure, payment frequency, and whether it’s subject to prepayment penalties.

Maximizing returns for medical practice loans.

The best investments start with a clear plan. To get the most value from your financing, focus on improvements that directly improve your patient care, capacity, or efficiency. This ensures your financing is spent towards business improvements that positively impact revenue.

Then, continually measure outcomes by tracking metrics such as appointment volume, billing turnaround times, or administrative costs. Some financing, like medical equipment loans, may bring in more revenue right away. For other loans, it might take longer to start seeing a return on your investment.

Once you start experiencing ROI, consider reinvesting early gains into additional marketing or service expansion. These types of thoughtful, disciplined moves may help strengthen your practice’s overall financial resilience.

Tax and accounting considerations.

A medical practice loan may offer tax advantages. Interest payments are often deductible as business expenses. Equipment purchases may qualify for Section 179 deductions, allowing you to reduce taxable income quickly after making capital investments. You may also be able to depreciate renovation and buildout costs over time. To capture all potential tax benefits, consult with a healthcare-focused CPA who is experienced in medical practice accounting.

Lendio helps medical practices find the right loan.

Launching or growing a medical practice often means taking on six- or seven-figure expenses. Lendio simplifies the search for financing by connecting doctors, dentists, and other healthcare entrepreneurs with a network of more than 75 lenders specializing in business and medical financing.

Apply today to compare offers side-by-side and find a medical practice loan that fits your needs.

Launching a startup can be an exciting yet unpredictable challenge. Expenses often pile up before your first sale or invoice payment. Even a solid business plan can run into cash flow gaps that stall growth or make it tough to cover day-to-day costs. 

That’s where a startup business line of credit can help. This flexible financing tool gives you on-demand working capital when you need it most. But like any business funding tool, it also comes with benefits and drawbacks. 

Before you apply, it’s important to understand how a business line of credit for startups works, what lenders look for, and how its pros and cons stack up against other funding options.

How business lines of credit work for startups.

A typical business line of credit is a revolving form of financing, similar to a business credit card (though often with higher credit limits and different repayment terms). Instead of receiving a lump sum upfront as you would with a term loan, you qualify for a credit limit and only borrow what you need, when you need it. You pay interest solely on the funds you draw, not the full credit limit. And as you repay, your available credit resets. The cycle repeats throughout the draw period.

For example, if your startup secures a $50,000 revolving credit line and you draw $10,000 for a project, you’ll only pay interest on that $10,000 until you repay the balance. Once you pay back the money you borrowed, the full $50,000 limit becomes available to use again.

This revolving structure gives startups breathing room between pay cycles, new projects, or product launches. For many founders, that flexibility makes business credit lines a preferred financing alternative to long-term debt.(Note: Some lenders also offer fixed lines of credit. This financing option lets you borrow once and repay without the ability to draw again.)

Startup eligibility factors.

Qualifying for a business line of credit depends on each lender’s eligibility criteria. Banks tend to prefer established companies. Online lenders often work with newer businesses that demonstrate repayment ability.

• Time in business: Traditional lenders, such as Wells Fargo or American Express, may prefer to work with borrowers that have one to two years in business. However, online lenders may accept newer startups (at least six months of operating history) that can show steady deposits or strong financial projections. Within the Lendio Marketplace, we partner with multiple lenders who offer lines of credit to businesses from brand new startups, to those with 6 months - 1 year in business. 
• Revenue and cash flow: Consistent monthly revenue demonstrates an ability to repay the money your business borrows. Requirements vary, but startups with at least $8,000 in monthly revenue often have better approval odds.
• Personal and business credit scores: Both your business credit and personal credit matter. If your company is new, strong personal credit may help offset limited business credit history and help you qualify for better rates.
• Collateral or personal guarantee: Some lenders may ask for collateral, like business equipment or inventory, if you’re applying for a secured business line of credit. If collateral isn’t an option, a personal guarantee might also boost approval odds or help you secure lower interest rates.‍
• Financial statements and projections: Lenders may review financial statements (e.g., bank statements, profit-and-loss reports, cash flow forecasts, etc.) when you apply for a startup credit line. These documents can help show that your business has a plan to manage and repay the money it borrows.

Meeting lender requirements doesn’t guarantee approval for financing, but it may put your company in a better position. If your business is too new to qualify with a bank, Lendio’s marketplace includes lenders that specialize in startup-friendly business financing.

Pros of a business line of credit for startups.

A business line of credit can be a valuable resource when you’re building a company from the ground up. Below are some of the top advantages for startups. 

Flexible funding for fluctuating cash flow

Most startups haven’t had a chance to establish predictable income yet. You might make a big sale one month and barely break even the next. Although this situation can be stressful, it’s part of the growth process. A business line of credit for startups can help you manage that inconsistency.  

You might use a line of credit to cover inventory purchases before a busy season, fund marketing campaigns, or handle payroll while waiting for invoices to clear. That flexibility is why many small business owners prefer a revolving credit line over a traditional business loan.

No lump-sum debt commitment.

Traditional loans provide a fixed amount of money you have to repay with interest, whether you use the full balance or not. With a line of credit, you borrow only what you need, when you need it.

That means you’re not paying interest on unused money or stuck with debt you don’t need right away. This arrangement can help startups keep financing costs lower while still having access to capital for future needs. As a result, startups can reduce the risks of overborrowing and overspending.

Opportunity to build business credit.

An often overlooked perk of business lines of credit is their ability to help you build business credit. Lenders often report payment activity on credit lines to the business credit bureaus (like Experian, Equifax, and Dun & Bradstreet). Over time, paying on time and keeping your credit utilization low could improve your business credit score—possibly opening doors to better financing options later.

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A business credit line could be a fast, easy way for your startup to begin separating personal and business credit. Remember, keeping personal and business finances separate is essential for your company’s long-term stability.

Quick access to working capital.

Many business loans take days or weeks to fund. But some online lenders can approve and fund a business line of credit within a few days or less. And once you open a business credit line, you’ll have the ability to access funds as needed during your draw period (up to the credit limit on your account).Fast access to cash means you can act quickly when unexpected costs come up, like broken equipment or a time-sensitive investment opportunity. For new business owners juggling uncertainty, having access to instant working capital can be a major stress relief.

Cons of a business line of credit.

While the benefits of a business credit line are appealing for startups, founders should also consider the limitations of this type of financing before applying. 

Cost factors: rates, fees, and potential for overspending.

Business lines of credit typically feature variable interest rates, meaning that the APR you pay fluctuates based on market conditions. While this arrangement can work in your favor when interest rates drop, it also means that rates (and your payments) could increase unexpectedly.

On top of interest, lenders may charge:

• Annual fees
• Origination fees
• Draw fees (for each withdrawal)
• Late payment fees

It’s important to read the fine print before you sign any agreement. You should always calculate the total cost of borrowing upfront.

Because funds are so easy to assess, overspending is another risk to be aware of with business credit lines. As a startup, it’s important to be aware of this fact and treat your business line of credit like a financial tool, not extra cash.

Qualification barriers for startups.

New startups with limited credit history or inconsistent revenue may struggle to qualify for a business line of credit. Other startups might receive smaller credit limits or higher rates. Many lenders prefer borrowers to have at least six months of business history and a solid credit score before offering favorable financing terms.You might offset qualification challenges with collateral or a personal guarantee, but those options carry added risk. If your business can’t repay its debt, you could be personally responsible.

Short-term nature compared to other funding sources.

A line of credit is designed for short-term needs, not large-scale projects. So, if your startup needs funding for long-term investments (e.g., real estate, large equipment, etc.), a term loan or SBA loan might make more sense. 

Lender can reduce credit limit.

Another drawback to consider is the fact that lenders can reduce or freeze the credit limit on a business line of credit. If your business experiences financial setbacks or your credit score declines, you might experience this scenario. That’s why it’s important to maintain a strong financial foundation and diversify your funding sources.

Business line of credit vs. other startup financing options

Even if a business line of credit seems like a good fit, it’s smart to consider and compare other financing solutions. The right funding source for your business depends on your goals, timeline, and risk tolerance.

When a line of credit makes sense for startups

A business line of credit could be a good choice if your startup:

• Needs help managing cash flow gaps or seasonal slowdowns. 
• Wants flexibility to handle recurring or short-term expenses. 
• Plans to borrow small amounts of money and repay debt quickly. 
• Prefers to avoid long-term debt.
  

Consider the following scenarios. An Ecommerce startup might use a line of credit to stock up on inventory ahead of a holiday rush and repay the balance after sales post. Likewise, a new consulting firm might draw from its credit line to cover payroll while it waits for client invoices to clear. In both cases, access to revolving capital keeps business operations running smoothly without the burden of fixed-term debt.

Startup financing alternatives.

If a business line of credit doesn’t seem right for your startup, there are other ways to borrow. Below are more startup business loans that might work for your company instead.

1. Term loans

A business term loan provides a lump sum you repay over a fixed schedule. It’s a strong choice for long-term investments like expanding operations, purchasing equipment, or hiring staff. Payments stay consistent throughout the life of the loan, making budgeting easier.

2. SBA loans

The U.S. Small Business Administration (SBA) partially guarantees SBA loans. There’s less risk involved for the lender and borrowers receive improved access to capital. SBA loans typically feature longer repayment terms and competitive interest rates. These benefits often make https://www.lendio.com/blog/sba-loan-startup (provided applicants have steady revenue and detailed business plans to satisfy SBA lender requirements). 

3. Business credit cards

A business credit card could also work for new business owners who want a financing option to cover everyday expenses and small purchases. While credit limits are sometimes lower than business lines of credit, business credit cards may also offer rewards and help build credit. Just be mindful of higher interest rates if you carry a balance.

4. Equipment financing

Equipment financing can help you purchase machinery, tools, vehicles, or electronics while preserving cash flow. The equipment you finance serves as collateral for the loan. Repay the money you borrow in fixed monthly payments (plus interest) over a fixed term. 

5. Invoice financing

Another funding option that may work for certain startups is invoice financing. With this type of financing, you essentially sell your business’ outstanding invoices to secure working capital now. Terms vary, but you may be able to borrow up to 80% of your accounts receivables. 

Is a business line of credit right for your startup?

Whether or not a business line of credit is right for your startup depends on your goals, risk tolerance, and how you plan to use the funds. When you manage a credit line responsibly, it has the potential to help your new business maintain stability, cover short-term expenses, and build business credit. 

However, a business credit line isn’t ideal for every startup. If your funding needs are large, long-term, or growth-oriented, you might benefit from pairing a line of credit with another financing option (like a term loan or SBA loan). Explore the best startup lines of credit in the Lendio marketplace and apply today.