Business Line of Credit
Are you Eligible for Our Business Line of Credit (LOC)?
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What is a Business Line of Credit?
A business line of credit is a financial tool that enables any business owner access to cash for inventory, payroll processing, equipment loan, or any other short-term need. For many business owners, the business line of credit helps with managing cash flow. These can be unsecured lines of credit or come with personal guarantees.
Can I Get a Business Line of Credit?
Securing business loans means being fiscally responsible. What that means to the business owner is making sure your “house” or books are in order, and you can demonstrate proper cash management. No lender wants to offer a capital loan to someone who cannot manage their finances, either personally or in business.
That’s why lending institutions require a personal credit score or FICO of at least 650. The next consideration is whether the borrower has the money to pay it back. For the business, this means having a minimum monthly revenue of at least $10,000 a month. Naturally, more monthly income is better.
However, just because you have a 650-credit score and have monthly revenue more than $10,000 doesn’t automatically mean you qualify for the line. You also need to be in business for at least six months. Again, this is the absolute minimum. Does your company demonstrate a steady monthly cash flow and a healthy credit score?
Last, there can be no more than 5 NSF’s in the past three months. Lenders understand that stuff happens. What these lenders look for is a business owner that can manage the natural ups and downs that every business experiences, especially newer businesses.
What are the Average Interest Rates on a Business Line of Credit?
Rates can vary from institution to financial institutions on revolving lines of credit. The interest rates can start as low as 4.8% and can go as high as 19.9% if not higher. Every business lender considers a multitude of factors to determine the risk. These can range from time in business, annual revenue, industry type, personal credit score and business credit to a myriad of other factors. Business lending also involves looking at your business checking account and average daily balances.
What is the difference between a loan and a line of credit?
The most significant difference is a line of credit you only pay interest on the amount you use. So, if you’re approved for $100,000 and only use $15,000, the interest is only paid on the $15,000. With a loan, if you borrow $100,000 but only use $15,000 initially, you’re still paying back as if you used the full amount. Another significant difference with the LOC is your ability to refresh your line as you repay. With most loans, you cannot draw more money until you’ve repaid the full amount or with online lenders like Sunwise Capital, once you’ve repaid 50% of your loan.