A business line of credit offers you an alternative to a traditional business loan. Instead of a one-time lump sum, you have access to a revolving pool of funds that you can use when you need it. You can borrow up to your maximum available balance and you repay only what you borrow. Here’s what you need to know about business lines of credit.

What are the Rates and Terms of Business Line of Credit?

Rates and terms vary based on several factors, including your credit history, business financial information, and your time in business. Typically, rates range from 7% to 11%. Terms range from 6 months to 2 years.

How Much Can I Borrow?

The amount you’re able to borrow also varies based on several factors. Most companies offer lines of credit between $100,000 and $400,000. Some allow you to have a line of credit of over $600,000.

How Quickly Can I Get Funding?

One of the great things about a business LOC is that your time to funding is much quicker than with a traditional business loan. Approval typically takes up to a few days. Once you have the line of credit and want to make a withdrawal, you can receive the funds you need in as little as one business day.

Do I Qualify for a Business Line of Credit?

Companies offer LOCs often have several criteria that need to be met to qualify. In general, most companies look for:

  • A minimum credit score of 560.
  • An annual revenue of $300,000 or more.
  • A minimum of six months to one year in business.

When you apply, you will also need to provide the following:

  • Business and personal tax returns.
  • Bank statements.
  • Profit and loss statements.
  • Balance sheets.
  • Your driver’s license.

Benefits of A Business LOC?

A business LOC has many benefits, including:

  • You borrow only what you need.
  • You only pay interest on what you take.
  • Funds can be used for numerous business-related purposes.
  • On-time payments can help to improve your credit score.

Are There Any Drawbacks?

While there are several benefits associated with a LOC, there are a few drawbacks that you should consider when determining if it is the right solution for you:

  • You may need to provide collateral to secure the line.
  • The lower your credit score, the higher your interest rates.
  • You may need to provide updated financial information with each draw.

With business lines of credit, you get quick access to working capital. You take only what you need and repay only what you borrow. This flexible form of financing can help you to meet a variety of business needs whenever the need arises.