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Getting a Small Business Line of Credit – Q & A

A business owner getting a small business line of credit

If you’re a small business owner, you may be considering applying for a business line of credit. But before you do, it’s essential to make sure you’re prepared with the right questions. Here are some questions to ask when applying for a business line of credit. By asking these key questions, you’ll be in the best position to get the financing your business needs.

What is a business line of credit?

A business line of credit is an unsecured, revolving loan that businesses can use to meet short-term needs like purchasing inventory.

What is a revolving line of credit for business?

This type of funding is ideal for short-term purchases and expenses. The structure of a revolving line allows you to dip into your fixed amount frequently and pay back quickly to help manage any bumps in the road.

Can I get cash from a business line of credit?

If you’re looking to get access to cash for your business, consider taking out a line of credit. In some cases, you may need collateral to secure the line, but you have an option if the need for cash outweighs that. 

How does a business line of credit work?

A business line of credit refers to an agreement that permits an account holder to borrow money repeatedly up to a set dollar limit. Each payment, minus the interest and fees charged, replenishes the amount available to the account holder.

What are the requirements to get a business line of credit?

To qualify for a business line of credit, this type of financing requires a 550+ credit score on your credit report, at least six months in business, and annual revenue of $75K or higher.

What should I look for in a business line of credit?

When shopping for a business line of credit, you’d want to look into the interest rate, whether there are any annual fees, and whether there are any fees per draw. 

Is a line of credit good for business?

A business line of credit can be a valuable financial tool to help you approach financing in the best way possible. Whether it’s for more extended periods, more extensive projects, or when things get tough, having this option will give your company an edge over competitors who don’t have access to it.

Does a business line of credit affect credit score?

Business loans, such as those used to buy equipment, can affect personal credit if there is a personal guarantee. Personal guarantees mean that your personal finances are at risk, and if the company defaults, it will ultimately lower your personal credit score.

What does no PG mean for business credit?

The no PG (personal guarantee) option is for those who don’t want to put their personal credit and assets on the line when applying for business credit. Obviously, with no collateral or security, the rates and terms get more costly. 

Do business lines of credit require a personal guarantee?

Businesses have been turning to lines of credit to provide themselves with short-term financing. This type, which does not require any personal guarantees from you and is often the only credit available in many cases for small businesses, is called non-collateralized or no personal guarantee business line of credit lending. 

What is a line of credit, and how would a business use it?

A business line of credit (LOC) is an unsecured, revolving loan that provides funds to a company for short-term needs, such as purchasing inventory.

Can I use a business line of credit to pay myself?

It’s essential always to keep your business and personal life separate. We do not recommend paying yourself with a business loan at all. It makes no sense to temporarily put your business in financial jeopardy to cover personal responsibilities temporarily. Some lenders may call their loans and pursue legal action if they become aware that this is the case.

What are the benefits of a business line of credit?

A line of credit is a flexible funding option that a business can use to help meet short-term operating costs, cover gaps in cash flow or take advantage when opportunities arise. You don’t need an extensive plan because they’re designed to be used whenever necessary.

Does the business line of credit shown on the credit report?

When applying for a business line of credit, it’s essential to know its effect on your personal finances. If you personally guarantee an outstanding debt and your company has trouble repaying it,  this could result in lower credit scores.

Is it hard to get approved for a line of credit?

If you have trouble getting approved by traditional financial institutions, you might consider applying for your business line of credit with an alternative lender. Alternative business lenders focus more on performance than credit, so they may be able to provide financing even when other banks reject applicants because their scores aren’t high enough or any other reasons for the denial.

How long does it take to approve a business line of credit?

The approval process for business loans can vary depending on who you apply with and where the bank is located. Here at United Capital Source, the average time to get a business line of credit is anywhere from 1 to 3 business days on the low end. 

We will help you grow your small business.

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