Commercial Credit Line
A commercial credit line is an amount approved by the bank from which the client will decide what amount to use and will only pay for the amount used, this will also generate interest only when it is used in addition to being provided a fixed interest as well as payments fixed in the previous evaluation.
What is a line of credit?
The balance on a line of credit is revolving, which means that borrowers can use the funds, pay, and then spend again on a rotating cycle. In this way, lines of credit are very similar to business credit cards.
Business owners will generally use a line of credit to remodel or expand their stores / offices, buy new tools or equipment, meet payroll, buy inventory, launch a marketing campaign, or cover any unexpected expenses.
How do I get a line of credit for my business?
If you apply for a line of credit with a top-notch bank, you will have to complete extensive documentation to prove that you have stable cash flow and a reliable credit score. Even after submitting all the documentation, there is no guarantee that your loan will be approved.
Requirements:
- Time in business: 1 year min.
- Monthly profit: $ 20K avg.
- Bank statements: 6 months
- Overdrafts: Less than 5 negative days per month
- Minimum credit score: 630
Application Process
- Complete credit application
- Last 6 business statements
- Driver’s license or passport
- Void company check
How Business Lines Of Credit Works:
Here is an important question; When it comes to your business, how do you prepare for the unexpected? Maybe you’ve been saving for a rainy day, yet any good or bad surprise can happen to anyone and that’s when a revolving business line of credit comes in handy to fill any financial gap.
With a revolving line of credit, you can borrow money to match your cash flow, repay it, and reuse it, as long as you don’t go over your credit limit.
Used wisely, a line of credit is a flexible financial tool that can help you grow your business, pay bills, cover payroll, or make short-term investments.
It’s a good idea to get a rotating LOC, even if you aren’t going to use it right now. Remember that the ideal time to apply for business financing is when you don’t need it and not when you are desperately looking for capital.
Credit line:
A fundamental difference between a line of credit and a regular Small Business Term Loan is that with a LOC, borrowers can withdraw as much capital as they deem necessary to meet their business needs and pay interest only on the money portion they borrowed.
Unsecured and Secured Lines of Credit:
If you are considering getting a line of credit for your business, keep in mind that there are two types; a secured LOC and an unsecured LOC.