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Updated: October 9th, 2023
As a business looking to secure funding, you have a variety of options to explore. A small business line of credit is one possibility that may be the best choice for your unique needs. Many owners, operators, and organizational stakeholders find small business lines of credit to be a flexible financial solution that is capable of helping fill both anticipated and unexpected funding gaps. These popular funding options provide advantages and perks that are not found in other traditional lending products. For these reasons, securing a small business line of credit is something more entrepreneurs and business owners are seeking.
What makes a small business line of credit attractive to so many? It’s the fact that these funding solutions behave in a manner more similar to a credit card, rather than a loan. For example, a common term loan provides recipients with a full upfront lump sum payment that is then repaid with interest over a fixed period of time.
A line of credit functions in the way that a business has a borrowing limit, and can draw financial funds as needed — up to the set limit. The business is responsible for repaying on money borrowed, plus interest over a set period of time. The business is only responsible for paying on the amount of money used in their line of credit — not necessarily the total amount they were approved for.
A business that secures a $50,000 small business line of credit and only uses $40,000 in funds, is only responsible for paying on the $40,000 principle plus the interest on that sum.
Along with most lines of credit, there are related fees to keep in mind associated with the account upkeep. These expected fees could include:
There are several key benefits to small business lines of credit that make these funding solutions appealing from both a financial and operational perspective. With this lending option, businesses:
On paper, those features are clear upsides, but how do small business lines of credit benefit the day-to-day? Common ways in which these funds help organizations meet their goals and financial needs include:
Small business lines of credit are rather straightforward in how they work — making them easy for business owners and operators to understand. That being said, there is variability that exists with lines of credit that businesses are able to choose from.
Secured Line of Credit: A secured line of credit is when a business is required to provide collateral to the lender in the case of default on the debt. Secured lines of credit typically are offered on lines over $100,000
Unsecured Line of Credit: Most lines of credit are extended as unsecured, meaning the business recipient does not need to provide collateral in case of default. Most unsecured lines of credit top out at $100,000
Revolving Line of Credit: A revolving line of credit remains open until the recipient or lender closes the account. When payments are made on this type of account, these funds become available to borrow again and the credit amount may be used repeatedly as long as the limit is not exceeded.
Non-Revolving Line of Credit: A non-revolving line of credit is a one-time arrangement, and when the debt is paid off, the lender closes the account. With these accounts, funds are not replenished or made available after payments are made.
If your business is looking to secure a small business line of credit, many lending providers exist. In order to apply, several items of documentation must be provided, along with qualifying criteria must be met.
You will most likely need to provide:
Here at Funding Circle, we strive to empower small businesses with a wide range of favorable financial solutions that make a direct impact on their organization. Our small business lines of credit can provide companies funding amounts between $6,000 – $100,000, flexible repayment plans, and interest rates as low as 10.99% APR 2.
With quick lending decisions within 48 hours and fast delivery of funds, we are able to get small businesses the financing tools they need to meet their short and long-term goals. Apply today, and secure a responsible funding solution.