Small Business Line of Credit

What is a business line of credit and how

does it work?

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A business line of credit is a revolving loan that allows access to a fixed amount of capital, which can be used when needed to meet short-term business needs. A business line of credit is the best financing option when you need extra working capital to cover recurring business expenses or bridge cash flow gaps. With ongoing access to funds, you have the flexibility to withdraw only what you need, when you need it—and pay for only what you use. So, you’ll be prepared for whatever challenges and opportunities come your way.

 

Benefits of a Business Line of Credit

Instant Funding: Get money in your account within seconds every time you make a withdrawal—24/7, even on nights and weekends.*

Only pay for what you borrow: Withdraw what you need, when you need it. And pay interest just on the financing you use.

A consolidated payment for all withdrawals: Make one weekly payment on all withdrawals, avoiding the headache of multiple payment schedules.

Access more funds automatically: Receive automatic credit limit increases when we review your credit profile and determine if you qualify. We do this on an ongoing basis, so the opportunity is often there.

Business credit building: Help build your business’s credit by making on-time payments, which we report to the credit bureau.

Revolving credit: Apply once and funds replenish when you pay them back, so long as you make timely payments.

No prepayment penalties: Get more flexibility by paying off your line of credit anytime you’d like, with no penalty or fee.

 

simple

Get Started

Step 1. Complete the application

Our application is pretty simple, and you can apply online or over the phone.

Step 2. Get a decision

Your dedicated loan advisor will review your options with you.

Step 3. Receive your funds

Complete the online checkout and receive your funds as soon as the same day.

 

Ways to use a business line of credit

Unlike a term loan, a business line of credit allows you to run your business without having to apply for a new loan every time you need a bit of extra cash. And with ongoing access to working capital, you can plan for and better manage your business’s future cash flow with less stress. Your line of credit can give you the boost you need to take advantage of opportunities when they arise.

One of the main benefits to having a business line of credit is that it’s revolving. That means you can access the credit line when you need it, pay down the balance, and use the line again as funds replenish. There are many ways you can use business lines of credit. Here are some popular reasons why other small business owners use credit lines.

Top ways to use a line of credit

1. Reopening your business

2. Bridging cash flow gaps

3. Covering payroll

4. Hiring more employees

 

Additional resources on business lines of credit

 

Business Line of Credit vs. Business Credit Card

A line of credit is a revolving loan that provides a fixed amount of working capital that can be accessed as needed. All or part of the credit line can be accessed at any given time up to the fixed limit, repaid, and used again. Interest is only paid on the amount of credit used. A business credit card is also a very popular and flexible financing and purchasing tool for those times when business owners need quick access to cash.

While business credit cards are similar to business lines of credit and are both used by small business owners on a regular basis, there are some purchases or payments that can’t be made with a business credit card. For example, you may not be able to make certain payments including your property lease, payroll, and invoices from vendors; but you can use the funds from your business line of credit. 

 

Secured vs. Unsecured Business Lines of Credit

There are different types of loans for different types of business needs. One type of lending common for small business is asset-based lending. Asset-based lending can be any lending product that uses an asset as collateral for the loan, or in this case, a line of credit. In the event the borrower defaults on the loan, the lender can take possession of the asset. Assets can include things like real estate, equipment, inventory, accounts receivable, or cash accounts. These assets can be pledged as collateral to back new loans, and whether they are used as collateral determines whether the loan or line of credit is “secured” or “unsecured”.

A secured business line of credit requires a business to pledge assets as collateral to secure the line. Since a line of credit is a short-term liability, lenders typically ask for short-term assets, such as accounts receivable or inventory. If the borrower is unable to repay the line, the lender may proceed to assume possession of the collateral and sell the asset in order to pay off the balance.

An unsecured business line of credit does not require a business to pledge assets as collateral to secure the line. Unsecured lines of credit typically require the business owner to have a strong credit profile and credit score, along with a positive business track record to qualify. In general, unsecured lines of credit have slightly higher interest rates and line sizes are relatively smaller.