Business Term Loan vs. Business Line Of Credit (Unsecured)
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The common question we answer when speaking with business owners is: When does it make sense to apply for a business line of credit or a business term loan?

First, let’s discuss the advantages and features of each of these business funding products. We’ll also discuss when each type of product is suitable for your small business.

Business Term Loans for Large Asset Purchases

As the name suggests, a business term loan is a fixed sum borrowed over a fixed term. United Capital Source provides business term loans up to 60 months. These loans are typical for companies from industries that require large asset purchases or where upfront capital costs are required. Our clients who require business term loan include construction contractors where large amounts of brick, timber and steel are required to complete building works. Construction contractors are paid in schedules once the milestone building stages are completed. Therefore, payment of building materials, supplies as well as labor is required before invoices are paid for works completed. Being located in New York City, our business clientele includes hundreds of companies from the construction and building industries.

Other large fixed purchases requiring upfront payments include rental car operators and operators of limousine fleets. New York City is one of the most densely populated cities in the world. In turn, we have dozens of limousine operators as clients with business term loans.

Documentation Required for Business Term Loan

Here are some things you’ll need when you apply for your business term loan with UCS:

  • Driver’s license
  • Voided business check
  • 3 Months Bank statements
  • United Capital Source 1 Page Application

Business Term Loans + Speed of Application Processing

Let’s discuss the benefits and advantages of business term loans. Our customers are content business term loans in most cases. There is a fixed rate of interest and the loan can be approved within 1 to 3 business days.

At UCS, we recognize that you can’t stop everything to apply for a business term loan. Our processing speed is one of the most important reasons why businesses work with us. In this video, one of our loyal customers, Mr Andy Decime, owner of Mechanix On Call, speaks about his experiences of trying to obtain a small business loan from a bank before working with United Capital Source to secure funding for his auto repair business.

Business Term Loans Can Help Improve Credit Scores

Many businesses are not aware that business term loans when repaid consistently on time will improve their business credit score as tracked by Dunn & Bradstreet. In many cases, retail businesses opt for business term loans over loans against credit card payments as a method of business funding if they qualify.

Unsecured Business Line of Credit

The easiest way to understand a business line of credit is to think of it as a credit card. That is, you can draw funds from the credit line as your business requires it. At United Capital Source, we pride ourselves on working very closely with our clients. We ensure that they have flexibility with either daily, weekly, bi-monthly, and monthly payback options.

It is common for businesses to make monthly payments. Borrowing or using more as your principal is paid down is an option. Interest rates are slightly higher than the prime rate with business lines of credit. With this type of product you don’t need credit cards and their high rates again!

Tip: Business Line of Credit Avoids the need for Multiple Credit Cards

We feel that it’s not good business practice to apply for and use multiple credit cards.  While it’s tempting to apply for 3 or 4 credit cards, maxing out those limits to finance business expenses or cash flow issues is not a sound business practice. Remember, the interest rates charged by credit card companies are excessively high. At some point, you’ll be denied if you apply for too many credit cards. This is not desirable for your credit score.

Documentation Required for Business Line of Credit

Here are some things you’ll need when you apply for your business line of credit with UCS:

  • Driver’s license
  • Voided business check
  • 3 Months bank statements
  • United Capital Source 1 Page Application

More than Payback Option Flexibility

In addition to the flexibility a business line of credit provides, there are many other advantages. One advantage of credit lines is there are no prepayment penalties. Business owners may be concerned about interest rate increases affecting their repayment schedules. These concerns can be factored into the repayment as a buffer when originating the loan. Be sure to discuss this  when determining the amount of your business line of credit.

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