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Home / Business Line of Credit
A line of credit for business offers access to capital on an as-needed basis, where you only pay on what you draw.
A small business line of credit gives you flexible access to cash on an as-needed basis. This type of financing allows you to draw cash from your total credit limit for any business purpose – and only pay on what you use.
With a revolving line of credit, more cash will become available as you pay down your balance. Unlike selling equity, the funds from a business line of credit allow you to maintain business ownership, profits, and full control.
You can also use it to bridge cash flow gaps during seasonal slumps or as a rainy day fund. There are no restrictions on how you can use it – you can use a business line of credit to cover any costs or opportunities you face.
Wondering how to apply for a business line of credit? Well, different lenders have various qualifications, so whether or not you qualify can vary based on where you apply. The benefit of applying through a marketplace is that you can learn your options through a variety of lenders with only one application.
Banks and credit unions typically have more aggressive and demanding qualifications. If your business doesn’t have a spotless financial record, qualifying can be difficult. Even if your application is denied at a bank, you can qualify based on your annual sales at an online lender.
Online lenders are a better option for securing a fast business line of credit. With expedited underwriting processes, you can potentially receive your funds within 24 hours.
Marketplaces are less demanding, focusing on your business and opportunity over factors like history and credit. Applying and qualifying for a business line of credit can take some effort, but it’s not difficult or time-consuming through our marketplace.
Business line of credit application
Business lines of credit function like credit cards but with a different structure that’s better suited for small business owners. They’re also better for tax purposes – you can write off interest on a credit line but not for a personal credit card.
After qualifying for a business line of credit, you’ll receive a total credit limit. You can draw as much or as little as you need from that total limit in any number of installments, and you’re under no obligation to use the full amount.
This is done online, where you log into an account and transfer funds from your credit line to your business bank account.
You can continue to access additional cash as you pay it down. Instead of paying interest on the full credit limit, you’ll only pay interest on what you take. Before signing an agreement, be sure to ask for clear information about any fees. Avoid any agreements without clear, transparent information.
Remember – The “best” business line of credit is one that fits your business and where it’s headed. Make sure you work with a reputable, transparent lender to ensure that your financing fits your goals and won’t place any restrictions on how you grow.
Unlike small business loans, revolving lines of credit work by allowing you to continue accessing additional funds as you pay your balance down and require more cash. In other words, it is a type of program in which the user can borrow up to their credit again once the debt is repaid.
Some business lines of credit are revolving, while others aren’t. When you discuss the terms of your agreement, be sure to ask questions and confirm whether or not your line of credit is revolving. Revolving lines of credit are the fastest and easiest way to access additional cash as your business grows. Once you pay down part of the balance, you can draw more cash without reapplying. It’s simple, fast, and easy, and your working capital won’t be limited to your checking account.
For example, say you qualify for a $100,000 line of credit. You borrow the full $100,000 and use the cash to grow your business. You then pay down $50,000 using the revenue you generate, putting both your balance and credit limit at $50,000. With $50,000 paid down, you now have the option to borrow an additional $50,000. There’s no set end date, either. As long as you keep your credit line active or continue drawing and paying it down, you can utilize a LOC for months or even years. If you’re not actively using it, though, your small business line of credit may expire.
A top business line of credit option is one that has exactly what you need. If you aren’t satisfied with the first offer, don’t worry – there’s always a better deal out there.
A business line of credit can be a powerful tool in your back pocket. The flexibility allows you to draw funds whenever you need them and stay one step ahead of the latest challenge in your business – a priceless opportunity for any entrepreneur. Here are a few of the many benefits of leveraging a business line of credit in your operation:
A business line of credit for new businesses can change the way they grow. With flexible access to capital, you can build out necessary areas of your business without jeopardizing cash flow.
Term loans, SBA loans, and other traditional financing products provide you with a set amount of money that you must repay throughout the term outlined by your lender. If you wind up needing more than you originally anticipated, you’ll have to take out an additional loan on top of your previous financing, which can quickly become difficult to manage.
A business line of credit is a way around this challenge – the structure allows you to draw as much as you need from your total credit line without having to worry about taking out additional financing to afford your growth plans.
A business line of credit can either be secured or unsecured. The difference depends on whether or not your lender requires you to put up collateral.
Secured Lines of Credit:
Unsecured Lines of Credit:
Some lenders require that borrowers put up collateral, such as real estate, receivables, inventory, equipment, or their home, as a method of protecting themselves from financial loss if the borrower defaults. However, putting up your home as collateral puts both your personal and business lives at risk.
For this reason, it’s usually not a wise choice. Backing your financing with collateral simply gives the lender confidence in the event you default. Years ago, it was difficult for a small business owner to qualify for an unsecured line of credit, especially through traditional lenders.
Through the new world of online lending, small business owners can qualify for multiple unsecured lines of credit options and compare rates. While they don’t require collateral, unsecured options may have slightly higher rates due to the lender’s increased risk.
By putting up collateral and opting for a secured line of credit financing, you may qualify for a higher approval. That being said, you can usually still qualify for a competitive unsecured line of credit based only on your annual sales – even with personal credit challenges.
Fundamentally, credit cards and lines of credit are similar – they give you the ability to handle expenses when you need to.
Both financing products only charge on what you use rather than your total credit limit, but the cost is structured differently. A business line of credit is the ideal option for your small business if you’re growing or solving challenges and you need a lower-cost solution.
Usually, only about 3% of your minimum monthly credit card payment goes toward principal. Over time, this can add up to be quite expensive. Lines of credit typically have lower rates and better amortization schedules. Overall, this normally adds up to a lower total cost.
Credit cards are primarily transactional, meaning you can only use them to make purchases. It’s possible to borrow cash using a credit card, but this can be expensive. On the other hand, lines of credit give you the ability to instantly draw cash as you cover expenses and manage working capital.
If you’re debating between getting a credit card vs. a business line of credit, you should also consider fees. Some credit cards involve hefty interest rates. In most cases, these costs will outweigh the draw fees you may or may not pay with line of credit financing. If you opt for a business line of credit, you won’t accrue rewards like you would with a credit card.
However, you can maximize the value of both financing options by spending with your credit card to accumulate rewards, then paying the balance down with a line of credit. Using both has its advantages, but you should make sure that you’re choosing the best business line of credit and credit card for your business and where it’s headed by weighing out your options beforehand.
Lines of credit are intended to be flexible financing options custom-tailored to your needs. You can use them to cover expenses that are weighing your business down or pursue exciting new growth opportunities.
There are no restrictions on how you must spend this money – you can put it toward any expenses. Some of the most common ways that businesses utilize this business financing option include:
Access to a line of credit is like having cash on demand. The second you need cash, you can draw from your line of credit and get things moving.
You may also have to provide a personal guarantee, which is standard with most types of business financing, and is similar to a personal guarantee you already have with your credit cards.
What would you do if an opportunity to grow your business came along during your slow season? If you didn’t have the cash flow to take advantage of it, would you let the opportunity pass you by?
Business lines of credit make your opportunities attainable. You can quickly access funds, repay over an extended schedule, and enjoy a favorable format that allows you to keep your financing on the sidelines when you need it. Entrepreneurs with lines of credit commonly say that their cash flow and operations are more streamlined now that they have the right capital source in place.
Most business owners prefer a line of credit over other options because of how rates are structured. Rather than charging on the total approval amount, you’ll only pay on what you take.
This structure allows you to keep your line of credit on the sidelines when you need it – without worrying about excessive cost.
Determining your specific rate isn’t as straightforward as the payment structure. Rates can depend on a number of factors, including your time in business, credit score, annual revenue, and the lender you’re working with. Still, that doesn’t mean you should settle for a rate that doesn’t fit your business.
You should apply with multiple lenders to ensure you’re getting the best deal available. If you apply for a business line of credit online, the application process is much easier than dealing with that of a bank or credit union.
Applying through direct lenders one by one limits the options you could potentially qualify for, while applying at a marketplace leaves the door open to several potential options, ensuring you find the best one.
Applying for a line of credit is easy, and simply learning your options won’t affect your credit score. Here’s how it works:
Fill out our simple 60-second application to begin the process. Then, complete your online application by connecting your bank statements through our bank-grade portal in under 3 minutes.
Consider multiple loan options available within our marketplace. Hear your options explained by a knowledgeable Business Financing Advisor, and ask any questions you have.
Select the best option available and get funded in as little as a few hours. Start using your cash to grow your business right away, without restrictions on how you can use the funds.
We educate you on the best options available within our platform to ensure you get the best line of credit available.
You’re only a few clicks away from the capital you need to reach your full potential.
You only pay on the amount you draw – not your total credit line. That means that – if you draw $50,000 from your $100,000 credit line – you’re only paying interest on the $50,000.
This structure allows you to keep your line of credit on the sideline for when you need it without worrying about unnecessary interest.
If your lender reports to a business credit bureau, then timely and consistent payments will work toward strengthening your credit score. Otherwise, your timely repayment will build “credibility” and “creditworthiness” with your lender, which can help you secure better terms in the future.
Interest rates range from 5% to 60%, depending on your business credit score, annual revenue, your time in business, and your willingness/ability to offer collateral.
Collateral, which can be equipment, real estate, or strong receivables, serves as an extra layer of protection against defaults for the lender. By offering an asset to secure your financing, you reduce the level of risk for the lender and, in turn, decrease the interest rate you’ll receive.
Yes, you can secure a business line of credit with a lower FICO score, but you should also be realistic about the terms you qualify for.
Lower FICO scores are seen as “risky” by lenders, so they’ll offer higher interest rates and lower credit limits as a result. You may have to offer collateral, too, as a method of securing the financing.
If your credit score is less than favorable, it’s worthwhile to consider proactively strengthening it before applying for financing. Not everyone has enough time to do this, of course, but even minor increases can yield big savings when it comes to interest rates.
Unsecured lines of credit require no collateral backing, whereas a secured line of credit comes with a collateral requirement. If you default on secured financing, the lender can seize the collateralized assets to recoup their lost cost.
Although unsecured credit lines don’t need collateral, some lenders require a personal guarantee or lien to approve your application. These give your lender the right to target your personal assets if you’re unable to repay your loan.
It’s important to understand whether your contract requires collateral, a personal guarantee, or a lien before you finalize it. Never be afraid to ask your lender questions or walk away if a contract doesn’t make sense.
If you’re looking to get a business line of credit, you’ll need to approach the situation strategically. Here are some steps to take.
At IBA Loans, you can simplify the process above and gain a financing partner simultaneously. With one easy application, you unlock all the most competitive offers you qualify for within our diverse lender platform. Your personal Business Finance Advisor helps you select the best one with your best interest placed at the forefront.
Although your specific interest rate depends on a variety of factors, business lines of credit generally carry lesser interest rates than business credit cards. They also feature higher credit limits, which allows borrowers an entirely different level of flexibility and financial power.
It all depends on your business and goals. For some, the flexibility of a line of credit makes it a better option than a business loan, while others prefer the lump sum format of standard term loans.
There are many businesses that need a specific format of credit. For example, a business seeking to begin a major renovation of multiple storefronts would benefit more from a longer-term, more substantial lump-sum product. If they had leveraged a business line of credit, they’d likely have their entire line drawn, which would significantly raise what they’re paying in interest.
If you’re unsure of which financing option is right for your unique circumstances, our Business Finance Advisors can help. Complete our digital application today to start the process with our team.
Here are a few of the many benefits of a business line of credit.
The flexibility of business lines of credit is the most prominent benefit. Unlike other financing options, you’re able to draw funds whenever necessary and enjoy an extended repayment schedule.
Christina Foley2024-06-11Alex R. with IBA Business Solutions was extremely helpful. He was knowledgeable and helped us with everything in regard to this very quick loan. He explained every aspect of the loan and never left us wondering or waiting. It was quick and easy. We hope to do business with Alex R. in future. It was a very pleasant experience. Our team was satisfied with the process, and we will be reaching out again when the time comes. Thank you, Alex R. it was a pleasure, doing business with you. AAH
Jane Parsons2024-06-06Alex was very professional and informative
Kristin Thompson2024-06-01Brian is Awesome he makes the entire experience easy and from start to finish. I won't use anyone else. Great experience.
Charlotte Lee2024-05-16Taylor was my caseworker. I really must say that Taylor was AWESOME. She’s an expert at customer service. There were times my own attitude got out of hand but Ms.taylor never one time stopped helping. She did it in such a way where I always felt like she put me 1st. She always made me feel important. This is my 2 nd time dealing with IBA and Taylor was determined to find a solution. I’m happy with my results. Thx again Taylor.😊
richard fletcher2024-05-10Hey thing for the help I appreciate everything u did it was like 123
james burke2024-05-09Had very good experience with Alex Rubin help easy and fast help good job and god bless
Larry Thornton2024-04-17Quick and professional
Tina Bryant2024-03-29I was so proud to be a part of this- everything he and Elvis said they was going to do they did- Alex thank you -
Michael Reese2024-02-28Wow! Finally, a reliable source of help when needed! As an African American business owner, it is often easy to be disregarded when seeking temporary assistance. However, this company stands out. I collaborated with Ethan Scott, who displayed exceptional diligence. The application process commenced yesterday, and today I received my loan. I express my gratitude to Ethan and IBA Business Solutions.
Merideth Muzic2024-02-26They team was very helpful in providing information on their products and services. The delivery process was quick and easy.. Highly recommended.
Building a business is hard. We completely understand that. Here at IBA, our pledge is to turn your stress into solutions. Our business financing products and services will support your journey wherever it may take you.
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