A business line of credit provides flexibility for new or established businesses looking for a financing solution to supplement cash flow, take advantage of unexpected business opportunities, expand the business, or cover expenses.
A business line of credit can be either unsecured or secured (generally by inventory, receivables or other collateral). Lines of credit offer business owners easy access to funds whenever they need it. Lines of credit accommodate the seasonal credit demands of their business along with ups and downs in their cash flow. A business line of credit is also revolving, meaning the business owner can use it multiple times.
Rates – In general, a business loan has a fixed rate, while a business line of credit will likely have a variable rate that is connected to a specific interest, such as the “Wall Street Journal” prime rate.
Fees – With a business loan, there are fees when the loan closes such as a loan processing fee, appraisal fee for any collateral and a credit fee. With a business line of credit, in addition to the initial processing fee, there will be a fee each and every time the business draws from the line of credit.
Term – Typical business terms are usually fixed and no longer than five years unless the loan is secured by real estate. A business line of credit could have a term of up to ten years with an option for the bank to call the line in early.
Renewals – Business loans do not renew with the terms have ended. The business loan is used once, while a business line of credit is revolving and can be drawn upon multiple times.
Interested in learning more about a business line of credit? Speak to one of our funding concierges today!