When unexpected business expenses come up, a line of credit can be a lifesaver. A business line of credit is convenient, offering a way for you to withdraw what you need much like a credit card. You pay interest on what you use, rather than your entire credit line. 

Got questions about a business line of credit? Here is what you should know: 

What is a Business Line of Credit? 

A business line of credit is like a credit card in that you have a limit that you can borrow up to sometimes over, though at a fee. You will pay interest on what you borrow- rather than the entire credit line available to you.  

Why Not a Regular Term Loan?  

There are distinct differences between a regular term loan and a business line of credit. Term loans have fixed payments scheduled over a predetermined time; a business line of credit is used for smaller purchases or expenses and the payment schedule may be less rigid- though you may pay more in interest.  

What About Credit Cards? 

Credit cards are typically unsecured, so borrowers will pay higher fees and interest rates. A business line of credit may- or may not- be secured; the benefit of using collateral to ‘secure’ the loan is the lower rates and higher credit limits.  

What Can You Use a Line of Credit For?  

Use a credit line for any business expenses that come up. Be wary of using your line of credit for things like payroll, as this could demonstrate a deeper problem and greater cash flow issue.  

How Do You Get a Line of Credit? 

The way to get a business line of credit is to apply through a bank or lender, ideally through one that you already use. Even if you do not need one now, you may be glad that you have a credit line when the unexpected occurs. Plan on providing documents like bank statements, tax returns, and balance sheets when applying.  

Do you have a business line of credit? A line of credit may be all that you need to keep your business thriving and growing. Talk to the money experts to learn more at Achieve Capital Advisors