Editor's choice: Fundbox
- Loans up to $100,000
- No personal credit check
- Funds as early as 1 business day
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A business line of credit offers several advantages over other types of credit — especially since you can borrow as much as you need whenever you need it. But you may risk over-borrowing and could accrue multiple fees if you only make minimum payments.
A business line of credit allows you to borrow funds up to a predefined credit limit, and only pay interest back on the money you borrow. This flexibility means you can draw and repay your loan at your business’s base, similar to a credit card.
Most lenders allow you to make multiple draws — although there may be a fee for each one — and interest rates tend to be much lower than similar cards. This allows you to access the amount your business needs without forcing you to pay interest on the money you don’t use. And since many lines of credit are revolving, you’ll have access to your full line of credit as you repay.
This added flexibility is what makes a business line of credit valuable and practical for business owners. You can use your loan funds for just about any business expense, like buying inventory or covering an unexpected expense, and most lines are available from $1,000 to $250,000. The interest and fees you pay will depend on your lender, so compare your options before committing to a lender.
Some lenders are offering lines of credit at discounted rates to businesses with lost revenue due to the coronavirus outbreak.
For example, U.S. Bank is offering its Cashflow Manager line of credit at rates 1% lower than what your business would qualify for. Businesses can apply for credit limits from $10,000 to $250,000 with or without collateral using this program. Standard eligibility requirements still apply.
Before your business takes on a line of credit, ask yourself these questions:
After you’ve asked a few questions to make sure your business can afford a line of credit, you should compare lenders to make sure you’re getting the best deal possible.
While a business line of credit can be flexible and convenient, you should still be cautious before committing your revenue to debt.
To get started, follow these steps. But keep in mind that each lender is different, so you may have to provide more or less information when you fill out a specific application.
Most business line of credit lenders require you to have been in business for at least a year and meet certain revenue criteria. If you have a newly established business, check out our guide on startup loans.
While a business line of credit can be convenient in its flexibility, it can be tempting to make a large draw that adds more debt than your business can afford. Carefully compare lenders, and be sure to consider all your business loan options before making a final decision.
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