Should I choose a business loan or business line of credit?
Revolving credit provides the necessary cash essential for any business.
Having instant access to working capital can help with your cash flow while waiting on your accounts receivable.
Business financing such as a term loan or cash advances by banks or online lenders give borrowers access to larger amounts of short-term financing.
When a lender issues an unsecured business loan a lump sum is deposited in your banks account.
Repayment terms are set up front so payments can be scheduled in advance
Multiple online lenders, banks and credit unions offer business loan options such as these and provide borrowers with choices when it comes to financing their business.
Depending on what your business financing needs are will help you determine what type of a loan is best suited for your business.
Keep in mind lenders may sometimes require collateral when issuing a loan with lower rates.
Real estate can be used as collateral for a business loan in these instances.
What is a secured vs. unsecured business line of credit?
Unsecured business lines do not require the business owners to pledge any assets as collateral.
This is an attractive option for many borrowers because it provides them with available credit like a credit card would, but with rates much lower than a business credit card would cost.
Like with any unsecured business loans the borrowers personal credit score will play a factor in the decision for approval.
Secured business lines of credit will require the business owners to pledge assets or real estate as collateral before they can obtain financing.
The lender can seize the collateral if borrowers do not honor the repayment terms of the loan.
This type of financing usually carries lower rates than unsecured business loans.
What is a business or commercial line of credit used for?
Growing your business requires working capital.
You can borrow up to your approved credit limit for just about anything.
From buying inventory in order to increase annual revenue to investing in real estate, obtaining a business line of credit from a lender can be used however you see fit.
Will a bad credit score prevent me from securing a line of business credit?
Lenders require a credit score of 550 and above in order to qualify for this type of unsecured financing.
While in most cases having a credit score below 550 would prevent you from being approved there are other unsecured options to help you obtain cash for your business.