Business lines of credit are used to provide working capital for a business. This credit facility is often used to ease uneven cash flow or for short term business expenses. In an ideal situation the business line of credit would be paid down to a zero balance within a one year period. The business is able to draw funds as needed for inventory, supplies, machinery, payroll, and other short term expenses and then pay the balance down with cash flow when the revenue is generated from the investment made by using the line of credit facility. Interest is normally charged only on the funds drawn or funds employed so the business incurs little or no cost if the line of credit is not in use. It’s a very good credit facility to have for peace of mind or unexpected expenses.
An example of use for this loan would be if your company needed to purchase inventory and hire and train two new employees to complete a large new order from a customer. You could draw on the line of credit to purchase the inventory and make payroll expenses needed to begin work on the project. Later, after the profit starts arriving in the form of cash flow you could pay down the balance of the line of credit. In this example you have flexed the line of credit and invested into growth, then paid the balance down after the profit flowed back to the business.
The line of credit is the loan of choice for working capital for most businesses if they can qualify. Most banks will require at least 3 years in business and two consecutive years of profit. In addition they will also want the business owner to have a personal credit score of over 680. This is not a loan choice for startups or a business operating with losses. A traditional line of credit requires solid business financials and business owners with good personal credit.
If you do not feel your business will qualify for this loan we have other loans that may fit for you. You may want to look at the cash flow loan, merchant cash advance loan, Business Financing or factoring.