Line of Credit
Easy to apply
Get approved easily before you need the funds, typically lines of credit are based upon your business checking statements and owner information. Lines of credit can be approved in as little as an hour through some lenders
One of the benefits of a business line of credit is its availability. Once approved for a business line of credit, you can draw funds when you need them for whatever legitimate business purpose you want. A line of credit can be a great backup if you are faced with a sudden cash flow emergency.
Pay interest only on the portion of credit you use
Unlike a term loan, you only pay interest on the balance you carry.
- Example: You own a construction company and have just finished several projects. You have a large number of receivables due in 10 days —but you have payroll for your 17 employees in three days, and don’t have the capital available. You could use the line of credit to cover the payroll, then pay it back as soon as your receivables come in.
Lower interest rates
Due to their longer durations, term loans are available at lower interest rates.
Free up operational cash flow to be used elsewhere
Term loans can give the borrower the option to use their cash flow in other areas while the loan provides the funding for larger investments in the business. As an example, term loans can help the business with the capital it needs to hire a new employee, covering the time it takes to train the employee and allow them to establish themselves before beginning to contribute to the bottom line.
Debit consolidation/ debit refinance
Long term business loans are a great option in restructuring of existing business debits you may have taken out when getting your business started. By consolidating these shorter-term higher interest loans or credit cards into a longer-term lower interest loan, can be another great option to free up working capital and re-invest into other avenues of your business.
Boosting personal and business credit scores
Term loans can increase creditworthiness, making it easier to for other business loans in the future. Making payments on time and fully satisfying a business loan will be reported back to the major credit bureau and increase your credit overall.
You own and operate a T-Shirt business that is growing fast. Your business is outgrowing its location and you need to buy a larger silk-screening press. In order for the press to fit, you need to move into a larger location. You know that in 2+ years the press will have paid for itself and the relocation costs, plus the overhead of the new staff. Getting a three to five-year term loan would be a great option to help your business achieve those goals with a low monthly payment.