Business owners seeking financial flexibility should consider small business line of credit options. A small business line of credit provides cash that you can put towards your business expansion plans or other cash flow funding needs. You only pay back what you borrow. The ability to obtain funds repeatedly, without reapplying, can empower small businesses to take on high-growth strategies with minimal disruption.
Instead of receiving a lump sum once and paying it back, a small business line of credit sets a maximum borrowing limit. For example, if your credit line extends to $100,000, but you only need $10,000, you’d still have $90,000 available. You can continue to draw from that $90,000 or pay some of the $10,000 back and increase your available line of credit.
In many ways, a small business line of credit is a bit like having a credit card:
• There is a limit to how much you can spend.
• You have specific repayment terms.
• The funds can be used for a wide variety of purposes.
Unlike a credit card, a small business line of credit will:
• Provide a simple repayment strategy.
• Offer ready cash.
• Typically give you access to a higher available balance.
With a traditional bank loan, a business receives a certain amount of money and repays it, plus interest, over a fixed timeframe. The interest rate is determined by a variety of factors, ranging from FICO score to cash flow. Usually, traditional lenders ask for a wide range of documents to determine the risk of the loan. The result can be a long and complex borrowing process.
At QuickBridge, we simplify that process by using technology and data analytics to our advantage. This approach streamlines our application and decision-making timeline. Additionally, we focus on short-term loans with service fees instead of interest rates. Even with this efficiency, a loan is still a set amount of funding that is best suited to a specific project or goal.
A small business line of credit establishes a base of funds a business can pull from as needed. This flexibility allows you to borrow capital up to your limit at any given time and pay it back gradually. From there, you can continue to use the small business line of credit if you make your payments and don’t exceed your credit limit. Essentially, a line of credit is an ongoing resource to help you sustain and grow your business.
A business line of credit can be valuable in many circumstances. But it isn’t always the best financing option. In addition, they can be difficult to qualify for if you have a bad business credit profile. Here’s a quick look at the pros and cons of obtaining a small business line of credit:
• Using all of your available credit is not required.
• You may end up with more net funding as you gradually make payments.
• There is less debt risk because you pay back only what you use.
• Self-management is required for the small business line of credit.
• Net costs are usually higher than a comparable loan due to fees.
• You have to resist using available credit on things you don’t need.
Because of their flexibility, a small business line of credit often comes with varied requirements and terms. These requirements differ based on the nuances of how the loan is structured, which is often a matter of the lender’s specific funding strategies. As such, businesses must carefully consider their options. Lenders will have different demands, with diverse choices in areas such as:
• Maximum amount of funding available.
• Service and repayment options.
• Borrower credit qualifications.
• Amount of time funds will be available.
• Duration of fund repayment period.
• Whether the loan is secured or unsecured.
Businesses can leverage a line of credit for a wide range of purposes, including:
A small business line of credit can be an ideal source of capital to bridge cash flow gaps. For example, seasonal businesses could use a line of credit to get through slower times. This financing strategy lets them use only what they need, rather than taking out a higher-dollar loan. Any business that occasionally needs small amounts of capital can benefit from a small business line of credit to help support day-to-day operations.
It can be difficult to determine how much funding is required to expand your business. Whether you want to launch a new marketing strategy, purchase inventory, or otherwise invest in your business’s growth, a small business line of credit can help. It provides you funding without forcing you to settle on a specific amount upfront.
How flexible is your business if a sudden large-scale opportunity emerges? How resilient is your organization when facing unexpected adversity? Small business line of credit options can help you quickly react.
While QuickBridge does not offer business lines of credit, we do have loan options aimed specifically at small business owners. And our product may be better suited to your business need. Let us get to know you and your business so we can help you make the best funding decision possible. Contact us to get started today.