Any business which needs ready access to cash, as well as flexible repayment terms would benefit by having a business line of credit. This type of financing is very similar to using a business credit card, in that it can be used for any purpose whatsoever, and can be repaid monthly so as to restore the original balance. All business lines of credit are subject to annual renewal and annual credit reviews, so it’s in your best interest to pay down the balance rather than run it up to your credit limit.
Secured and Unsecured Lines of Credit
In an unsecured line of credit, your business would not be required to provide collateral to the lending institution. This is more advantageous to the borrower, but because there are no assets involved which could be sold off by the lender, this type of credit line generally carries a higher interest rate. It’s usually possible to secure an unsecured business line of credit for somewhere between $10,000 and $100,000.
In a secured line of credit, you would offer the lending institution some form of collateral as security against any loan default on your part. This is generally a business asset which could be sold off at market value by the lender so as to recover their investment. There are various criteria for qualification for either of these types of credit lines, but most lenders require a borrower to have been in business for a fixed amount of time, and to show a strong balance sheet while in operation. By maintaining a business credit line in good standing, you will be able to improve your credit rating, and you will be in a much better position to qualify for future financing from other sources.
Business lines of credit can be a life-save in many situations when you don’t have ready access to other sources of cash. Contact us at Lighthouse Capital to find out how lines of credit might be available to your business.