A revolving line of credit provides a flexible option for business capital, giving you access to funds when you need them without having to pay for what you don’t use.
A business line of credit is a flexible business loan that allows you to borrow up to a certain amount, or credit limit, to cover short-term working capital requirements. When you get a business line of credit, the lender approves you to borrow up to a certain amount of money and you’re able to access some or all of that money as you need it. After you fully pay off a portion you’ve used, the full amount of your line of credit is available for you to use again.
Although business lines of credit do operate very similarly to a credit card, they are not the same thing. Credit cards typically have higher interest rates and in many cases, a line of credit does not have a mandatory monthly payment system.
Unlike a term loan, a business line of credit allows you to only pay interest on the amount you actually use. For example, if a business owner has a credit limit of $150,000 but only uses $40,000, they only have to pay interest on the $40,000 draw. Once the amount has been repaid ($40,000), the business owner can draw additional funds up to the amount of their credit limit ($150,000).
There are several different types of business lines of credit. Just like a regular business loan, a business line of credit can be either secured or unsecured. A secured business line of credit requires the borrower to put up an asset to be used as collateral while an unsecured line of credit doesn’t. Since an unsecured line of credit involves a higher risk on the part of the lender, the borrower needs to have a higher business credit score to be approved for one.
Business lines of credit also come in different term lengths: short term and medium term. Unlike with loans, term lengths have nothing to do with how long you have to make payments on it or how long it’s available to you. Instead, the different terms indicate things like interest rates and spending limits. For example, a short-term line of credit has higher interest rates, lower limits, and lower revenue requirements, similar to short-term loans. Conversely, medium-term lines of credit have lower interest rates and higher borrowing limits, much like a medium-term loan does.
Our lender partner network, Lend Bucket provides access to both secured and unsecured business lines of credit with a maximum credit limit of $300,000.
The main difference between a term loan and a line of credit is how you receive the money and the repayment terms. Term loans provide a specific sum of money that is repaid over a fixed period of time, otherwise known as the loan term. Lines of credit, on the other hand, provide a revolving account that allows borrowers to draw up to a certain loan amount, repay the amount borrowed, and redraw up to the amount of the credit limit to receive additional funds. Unlike keeping up with the fixed payments of a term loan, you will be required to pay interest on borrowed balance while the credit line remains open. In many cases line of credit, borrowers are required to meet a minimum monthly payment to avoid additional fees or penalties. Some lines of credit are open-ended; the line does not close after a certain period of time as it does with a term loan. Others may close or become inactive after a certain amount of time or period of inactivity.
As a business owner, there are often times when working capital is tight. Without ample liquidity to cover business expenses like payroll, inventory, rent, and utilities it can be difficult to maintain operations. As one of the most flexible financing options, lines of credit are great for ensuring that you have the necessary working capital to meet your business needs and have access to emergency funds if needed.
For many businesses, a line of credit is the go-to solution for stabilizing cash flows as borrowers can secure access to funds and then draw at a later time when additional working capital is needed. It’s also a great option for those who need to remain adaptable. After all, small business owners often have a limited window of time to seize the opportunity when it arises. A line of credit allows you to quickly access the funding you need to pursue the initiative.
Because you only pay for what you use, lines of credit are also great emergency funds. That said, a line of credit would not be the right option in certain scenarios, such as trying to open a startup. This is because the total cost of capital is typically lower with a term loan.
Click the “Get Started” button, enter some basic business information, and pre-qualify for loans for your small business.
Once approved, a loan advisor will reach out to you with the options you qualify for and help you choose the best business loan or financing product for your situation.
Funds are deposited directly into your bank account so you can use your funding immediately
Lend Bucket’s mission is to provide small and medium-sized businesses like yours with streamlined access to the funding you need to operate and grow.
Lend Bucket helps small and medium-sized businesses get funding. We strive to be a trusted and committed partner to you, our customers. We make getting loans for businesses affordable, simple, and transparent.
Lend Bucket is a direct lender of working capital loans and merchant cash advances. Through our partners, we offer SBA loans, business lines of credit, equipment financing, long-term loans, and invoice factoring.
Our financing experts can help you:
We work with small and medium-sized businesses to connect them with much-needed capital. Lend Bucket combines data science with a human touch, and we work directly with you to get the best company loans or financing for your unique needs, so you can focus on your products and services.
Some funding products like merchant cash advances and invoice factoring are less credit dependent because these financing products are based on sales instead of a credit report.
Similarly, equipment financing does not have as much emphasis on credit because the equipment can be used as collateral if you default on your loan. Many of our financing solutions can help you build business credit as well.
The eligibility requirements for Lend Bucket’s small business loans and financing depend on which one you’ve selected and are based on a business owner’s specific credit history and creditworthiness. Generally, you need to have:
Specific requirements will vary.
Before asking “how to apply for a small business loan or financing?” you should first consider whether the capital will help your business grow or help your business survive a crisis.
If you don’t have a good reason for business financing, the fees and interest can really add up.
However, if the business financing will help you buy new equipment, hire needed staff, or survive a crisis like the COVID-19 pandemic, then you should consider each of the following questions when reviewing the financing option.
Startups almost never qualify for traditional bank loans, and that is true for Lend Bucket’s business loans and financing as well.
However, there are a lot of options in small business loans and financing for new businesses and startups, including:
How can I use a small business loan or financing?
“Flexible” means that you can use the capital to fund whatever your business needs.
Some business financing is flexible in its usage, such as a working capital loan, business expansion loan, merchant cash advance, business line of credit, or SBA loan.
However, some loan and financing options are not flexible. Equipment financing can only be used to purchase or lease equipment. Any type of real estate loan will also be specific to funding a physical business location.
Wondering “how do I get a business loan”? Take ten minutes to pre-qualify for small business loans online and we will respond with the best funding options for you. You can get funds in your bank account in as little as 24 hours.
Lend Bucket’s mission is to provide small and medium-sized businesses like yours with streamlined access to the funding you need to operate and grow.
When the traditional banks say no, we talk to you about your business. It’s why we’re
trusted by over 30,000 businesses in over 325 industries.
