Small businesses sometimes have cash flow gaps that require urgent working capital before operations can run smoothly again. In such situations, business owners often turn to small business loans, like business lines of credit, to cover such expenses.
A business line of credit can cover recurring business expenses and fill cash flow gaps. Here’s what you need to know about business lines of credit and where you can get one with the best terms and lowest rates.
What is a Business Line of Credit?
A business line of credit is a flexible form of financing that allows you to borrow money up to a specific limit. It works much like credit cards since you pay interest only for the amount drawn on the line, and you can borrow again once you pay off the balance.
Unlike a traditional term loan that gives you access to a lump sum amount of capital, a business line of credit can give you the flexibility to draw funds on a needed basis. For this reason, small business lines of credit are an ideal financing solution when you need extra capital to cover recurring business expenses.
What You Can Use Business Line of Credit For
Unlike a business term loan, a line of credit gives you ongoing access to working capital without applying for a loan every time you need cash. This means you can run your business without worrying about cash flow gaps. Plus, it is revolving, meaning you can access the funds when you need them and borrow again once you make monthly payments to pay down the balance.
A business line of credit can be used for various purposes, including:
- Reopening your business: If you ceased operations and are looking to reopen the doors to get back up and running, you may find a business line of credit useful to cover operating costs.
- Bridging cash flow gaps: Most companies experience their share of ups and downs with regard to operations, which means cash flow gaps are likely to arise. But having access to a business line of credit can help you overcome those financial hurdles and get back on track sooner than later.
- Purchasing inventory: Take advantage of bulk discounts on supplies or inventory. You can also prepare for busier periods or introduce new products to your customers without exhausting your company’s reserves.
- Covering payroll: Never worry about running out of funds to cover payroll, even if outstanding invoices aren’t paid on time.
- Expanding marketing efforts: Get your business the attention it deserves and spread the word to the masses by investing in marketing.
- Onboarding more employees: You can also tap into a business line of credit to hire more employees so you can focus on leveling up your company.
Example of a Revolving Line of Credit
A revolving line of credit allows you to borrow money up to the credit limit once you pay off your existing balance without going through another application process.
Popular examples of revolving credit lines include credit cards, personal/business lines of credit, and home equity lines of credit (HELOCs).
Credit cards are by far the most well-known revolving credit lines. Borrowers are given a credit limit, the maximum amount they can spend on the card. Once the credit limit is reached, the borrower has to pay down the balance in full to access another amount.
You should know that most lines of credit come with a draw period or a timeframe during which you can make withdrawals. Credit cards are slightly different, though. You’ll generally have access to your credit line until you close the card (or if the card issuer closes the account due to mismanagement or other credit issues).
National Business Capital Business Line of Credit
If you’re looking for a business line of credit, you may want to consider online lenders like National Business Capital.
How Much Can You Borrow with a National Business Capital Business Line of Credit?
You can borrow anywhere between $25,000 and $5,000,000. After qualifying for a business line of credit, National will give you your total credit limit, where you can draw the funds whenever you need them and only pay for what you use.
Terms and Rates of the National Business Capital Business Line of Credit
The line of credit has flexible terms depending on your needs. Once you receive your credit limit, you can use as much or as little as you need in any number of installments.
The interest rates for the business line of credit vary based on the lender National matches you with. Generally, rates start from as low as 6%. So even if you don’t have perfect credit, it may be possible to steer clear of lending solutions with high-interest rates.
How to Qualify for a Business Line of Credit with National Business Capital
Like any other financial institution, there are minimum requirements you must meet to qualify for any type of small business loan. Most traditional lenders, like banks and credit unions, impose strict qualifications on annual revenue, business history, and credit rating.
With National Business Capital, however, you only need to meet these requirements to qualify for a business line of credit:
- Generate at least $120,000 in annual revenue
- Have been in business for at least one year
- Have a credit score of at least 600; National Business Capital doesn’t require perfect credit to qualify for financing.
The Difference Between Business Line of Credit and Small Business Term Loan
While both financial products provide you with the funds you need to have your business up and running, they’re structured differently. When you apply for a small business term loan, you’ll receive a lump sum amount of capital, which you’ll need to repay within a certain period with interest. To qualify, you’ll need one year in business, a credit score of at least 580 and $120,000 in annual revenue.
On the flip side, a business line of credit offers more flexibility. You get a line of credit that allows you to draw funds on a needed basis until you reach your credit limit. The minimum annual credit score is also a bit higher at 600.
The Difference Between Business Line of Credit and Equipment Financing
Equipment financing is a funding solution for businesses that want to purchase every type of equipment. However, unlike business lines of credit that you can use for virtually every business expense, equipment financing is designed specifically for buying business equipment.
Loans between $10,000 and $5 million with one to five-year terms are available, and you’ll receive funding in as soon as three days. There are no minimum time in business, annual gross sales or credit score requirements if your FICO score is 650 or higher. But if it’s below 650, you’ll need six or more months in business and $120,000 in annual gross sales.
About National Business Capital
National Business Capital is an online marketplace that offers numerous business loan options to small business owners in any industry. Some of the business financing options offered include small business loans, business lines of credit, equipment financing, SBA loans, and much more.
The online platform has a streamlined application process that connects and matches borrowers with more than 75 lenders to get better rates and terms. In addition, you don’t have to worry about the impact it can have on your credit score since the company pulls a soft credit inquiry.
National Business Capital is accredited by the Better Business Bureau (BBB) with an A+ rating. It is also a member of the Standard Business Finance Association (SBFA), a non-profit organization devoted to ensuring that small businesses will have access to the funds they need to scale.
How To Apply for a Business Line of Credit with National Business Capital
Are you ready to apply for a business line of credit? Here’s a step-by-step guide on how to apply for a National Business Capital business line of credit:
- Fill out an online application form: Before you start the loan application process, ensure that you’ve gathered your personal and business information. You’ll also need to provide at least three months of business bank statements.
- Match and review: Once you’ve submitted your application, a member of National Business Capital’s award-winning team will review and match you with the right lender from its network of dozens of lenders
- Approval: Get your funding in as little as a few hours after your loan approval.
If a business line of credit is not the right financing solution, National Business Capital offers other business funding options that might interest you, including: