Rapid Business Lenders since 1969

The Essential Guide to Business Lines of Credit

Gaining access to a business line of credit can be immensely beneficial towards funding growth without unduly impacting cash flow.

In this ebook, we’ll take a look at the way that such a credit mechanism works and what its benefits are.

What Is A Business Line Of Credit?

A business line of credit works in much the same way as a business loan, except that your business is only charged interest on the funds that it draws down rather than the full approved amount.

Your business can apply for a line of credit up to a certain limit. If approved, your business will then have access to those funds in full if required. However, if you realise that you don’t need to use all of the financing made available to you, then you’re not obliged to use it.

There are two main types of lines of credit:

  • Revolving Lines Of Credit 

This type of line of credit renews every time you repay the amount you borrowed. This allows for almost constant access to credit when needed.

  • Term Lines Of Credit

This type of line of credit provides once-off access to a limited amount of funds. Once the money is borrowed and repaid, the credit arrangement comes to a close.

Benefits Of Business Lines Of Credit

A business line of credit has numerous crucial benefits. Here are just a few of them:

  • It’s Highly Flexible

Arguably the greatest upside of using a business line of credit is its superior flexibility. You can use the funds for just about anything you need it for, whether its for managing cash flow, covering unexpected expenses, purchasing inventory, acquiring new assets, or investing in growth opportunities.

  • Interest Is Only Payable On Funds Used

Unlike regular business loans, where you have to pay interest on the entire amount that you’re approved for, a business line of credit only requires you to pay interest on the amount you actually use. This can help you save on interest costs.

  • It’s Cost Effective

A business line of credit is a more cost effective short term lending option when compared to things like a company credit card or a short term loan, owing to the lower interest rates that are usually offered.

  • It Improves Cash Flow Management

A business line of credit can help your business close short term cash flow gaps to keep the business afloat. It can also help you to avoid needing to dig into your operating captial to fund growth opportunities, thereby ensuring stable cash flow.

To gain quick access to a business line of credit, apply now through Rapid Finance Co.