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Is a Business Line of Credit right for me?

Business lines of credit are often times the best type of financing if you have a credit score of 560 or higher. The credit line gives you capital to draw upon to meet a variety of business needs. It’s sort of a financial cushion for a fixed amount that you can exercise anytime to meet a current cash flow gap.

The advantage of a business line of credit is that generally you are not required to use the funds until needed and you are only charged interest when it is used and as you pay the line down you also eliminate the interest charged.

Loan Amount $1,000 - $500,000
Loan Term 1 year - 20 years
Interest Rate 8% - 24%
Payment Frequency Monthly
Time to Funds 1 - 4 weeks
Benefits
  • Only pay interest on funds drawn
  • Credit is available when you need it
  • It is suitable for the majority of business needs
Drawbacks
  • May require collateral in some cases
  • Higher interest rates if you have a low credit score
  • There is a personal guarantee

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Qualifying

Most lenders will require the possession of an open bank account. Some businesses may be required to prove financial history of two or more years. And lending institutions will consider the small business’s credit score.

What is a Business Line of Credit?

A line of credit is an amount of money provided by a lender, which an individual can spend at will, either by credit or check, provided they pay some amount back each month.

What Types of Businesses is it Good For?

As a small business owner it is nice to have access to cash when you need it. A business line of credit is very similar to a business credit card. A line of credit is a good option to offset the “ups and downs” with business. This type of financing is meant to provide a helping hand to a solid business with a proven ability to repay the loan.

What are the Minimum Requirements?

Generally, most small businesses can qualify for a business line of credit if they have a credit score of 560 or higher. You will need to show your tenure in business and provide collateral to back the loan.

How Much Will a Line of Credit Cost?

Business Line of Credit Loan Calculator

Line of credit interest rates range from eight to twenty-four percent. The higher your credit score the better your rate will be. A traditional line of credit with a rate as low as prime+ can be obtained with a 680+ credit. If your credit is challenged at the moment then a non-traditional loan can give you a good option with higher rates.

Why Use Lendio?

Lendio’s mission is to empower your small business by making small business loans simple through options, speed, and trust. Whether you are looking for an acquisition loan or a line of credit, Lendio offers hundreds of different loan products from a variety of lenders. Find out which business loan is best for you.

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More Reading

How Does a Business Line of Credit Work? Infographic

8 Differences Between a Business Loan & Business Line of Credit

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