How to Apply for a Business Line of Credit

At some point, every small business will need to find a way to expand its access to working capital. For some, that could be a small business loan or angel investor. Others may decide to open a variation on one of several different business lines of credit.


Businesses who opt for a business line of credit over a more traditional funding route usually have short-term needs. For example, they may have received a larger than expected order – even larger than they projected – and need to purchase more supplies.


Others may prefer a line of credit because they are not sure how much they may want to borrow. Seasonal businesses also benefit from lines of credit, since seasons can be unpredictable, making business projections susceptible to change.


What is a Business Line of Credit?


As the name implies, a business line of credit is a set fiscal amount, maybe $20,000 or $30,000, which business owners can draw on when needed. They are very similar to personal lines of credit, like a credit card or an equity line of credit.


They are classified as revolving credit because you can draw from the funds and retain access to any other funds available. Once you pay back what was originally borrowed, you can return to the credit line and do it all over again. This is different from a fixed payment loan in which you borrow the whole amount up front, pay back with fixed payments over time, and then have to reapply for a new loan, if desired. Note that a credit line will typically carry a higher interest rate than a fixed loan.


Nearly half of all small businesses access business lines of credit at one time or another. They are particularly well suited for business owners who would rather forgo working with a traditional lender, like a bank or credit union.


How to Apply for a Business Line of Credit


If you are considering a business line of credit, apply before you need the working capital. You will not be penalized for using the cash until you need it. You may even want to have a small line open for unexpected emergencies.


Many lenders operate online applications where you can apply for business lines of credit in just a few minutes. Before applying, talk with a financial professional to make sure you are making the right decision for your business. They can also help you find the best loan for your situation.


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