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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?

Firstly, let’s discuss the advantages and features of each of these business funding products as well as discuss when each type of business loan is suitable for your small business.

Business Term Loan 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. As New York City is one of the most densely populated cities in the world, we have dozens of limousine operators as clients with term loans.


Documentation Required for Business Term Loan
Typically, our funding team requires the following information when applying for a business term loan:

Last 3 months of banks statements
Last 2 years of business tax returns (for amounts over $100,000)
Last 2 years of personal tax returns (for amounts over $100,000)
Accounts receivables statement for previous quarter (for amounts over $100,000)
Personal Financial Statement
Year to date P&L and Balance Sheet

Let’s discuss the benefits and advantages of business term loans. Firstly, and why our customers like business term loans is that there is a fixed rate of interest and the loan can be approved within 3 to 5 working days.

Business Term Loans + Speed of Application Processing
At United Capital Source, we recognize that your business can’t stop everything to spend weeks applying for a business term loan. Speed of processing is one of the most important reasons why small businesses favor business term loans provided by United Capital Source. 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 Improves 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 D&B. 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. If you are a retail store owner that has large volumes of credit cards used to buy products, our team of specialists will be happy to discuss when a business term loan is more suitable.

Unsecured Business Line of Credit
The easiest way to understand a business line of credit is to think of it as a credit card in it’s function. 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 to ensure that they have flexibility with either weekly, bi-monthly, and monthly payback options.

It is common for businesses to make monthly payments and you can borrow or use more as your principal is paid down. As the interest rate is typically slightly higher than the prime lending rate with business lines of credit, small businesses are not required to finance their business using different credit cards.

Tip: Business Line of Credit Avoids the need for Multiple Credit CardsCredit cards close up
Too often we are counseling small businesses across America advising them that it is not good business practice to apply for multiple credit cards and then use their large amounts of available credit. It is common for credit card companies to partner with airlines or department store chains to offer customers credit cards with limits of up to $30,000.

While small businesses owners can be tempted to apply for 3 or 4 credit cards and max out those limits to finance business expenses or cash flow issues, this is not sound business practice. Remember, the interest rates charged by credit card companies are excessively high and at some point, you will be refused credit by a credit card provider if you apply for too many credit cards. This is not desirable for your credit score.

Documentation Required for Business Line of Credit
Typically, our loans processing team requires the last three months of banks statements
when applying for a business line of credit.

More than Payback Option Flexibility
In addition to the flexibility of payback options which business lines of credit loans provide small business, there are many other advantages. One advantage of lines of credit loans is there are no prepayment penalties. While some 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 and often only interest rate payments are payable. Be sure to discuss this with our loan managers when determining for your business line of credit amount.

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your small business.

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