A business line of credit allows you to borrow money as and when you need to, up to an agreed limit and only pay interest on your outstanding balance and the days on which you borrow.<\/p>
Many business owners will find this form of credit more flexible than a business loan, plus you’ll usually be offered a higher credit limit than with a credit card<\/a>.<\/p> In this guide, you’ll learn whether a business line of credit is right for your company, how to find the best deal and what you’ll need to do to be approved.<\/p> A business line of credit allows you to borrow money as and when you need to, up to an agreed limit and only pay interest on your outstanding balance and the days on which you borrow.<\/p> Many business owners will find this form of credit more flexible than a business loan, plus you’ll usually be offered a higher credit limit than with a credit card. <\/p> Different business credit lines work differently, but the basic premise is similar to a credit card or overdraft<\/a>. You borrow what you need, when you need it, only pay interest on the amount borrowed for the days on which you were borrowing, then pay the money back as and when it suits you (subject to a minimum monthly repayment).<\/p> Once you’ve successfully applied for a line of credit, it’s there and available to dip into until you close your account.<\/p> Lenders may require you to secure your credit with collateral and it’s also possible that you’ll be charged administration fees on top of your interest payments.<\/p> While some products have specific “draw periods”, during which you can spend money from your line of credit, followed by “repayment periods”, most products allow you to access the funds whenever you need to (subject to your credit limit). This means it’s usually possible to “top up” your borrowing whenever you like \u2013 even if you’re still paying off earlier borrowing.<\/p> A business line of credit is handy for businesses that frequently need access to additional finance, perhaps due to unpredictable cashflow issues or a lack of capital.<\/p> It’s often used to fund sporadic operational expenses or emergency purchases, rather than large one-off payments (which can be planned for in advance). It could also work well as a means of working capital during the off-season for cyclical businesses. If you’re planning to make a large purchase to launch or scale your business, it will usually work out cheaper and easier to obtain a business loan.<\/p>How does it work?<\/h3>
Is a business line of credit suitable for me?<\/h3>