How a Business Line of Credit Works

business line

When you need a big cash infusion but cannot afford to take out a loan, a business line of credit may be the answer. A business line of credit works more like a credit card for businesses. It allows you to borrow money when you need it and pay it back over time. When you’re struggling to pay off your invoices, a business line of credit may be the perfect solution. Whether you need a small business loan for a small business startup or a large business loan, a line of credit can help.

Many small business owners use a business line of credit for short-term funding. These funds are revolving, so when you need to make a large purchase, you can use the funds again. Unlike a credit card, a business line of credit doesn’t have a set limit and can be used for any legitimate business expense. Many cyclical businesses rely on it for off-season working capital. A business line of credit is also useful if you need to make payroll.

When looking for a business line of credit, it’s important to keep in mind that the qualifications vary by lender. Many lenders tightened their lending standards during the recent coronavirus crisis, so borrowers should expect more stringent requirements. Generally, prospective lenders will require a business to have a healthy credit history, income tax returns, and current financial statements. You may also be required to provide collateral, such as real estate, if you don’t generate enough revenue to pay back the credit.