What is a
Business Line of Credit?
Many businesses have a line
of credit available for those unexpected expenses and they can be used
in place of a business loan. A line of credit allows you to draw on fund,
up to your maximum allowable credit line.
A line of credit often has
a much lower interest rate than a regular credit card will, making it
a more economical choice for business expenses. However, interest rates
on a line of credit is usually higher than that of a regular business
loan. There is often an annual fee accompanying a line of credit.
You will need to have good
business credit to get a line of credit for your business, but many people
successfully apply for a personal line of credit and use that for business
purposes. A line of credit can be either secured or unsecured, again depending
on your current credit status.
A line of credit lets you draw
on funds, as needed, for routine operating expenses up to the maximum
amount of the credit line. Credit lines enable businesses to better manage
cash flow. They usually carry a much lower interest rate than credit cards
but somewhat higher than bank loans for a specific amount and purchase.
Credit lines, like bank loans, are usually only available to profitable,
established businesses and can be secured or unsecured. There is often
a minimal annual fee.