Lines of Credit

Establishing a line of credit is one of the most flexible financial tools available to your business.  Funds can be used to finance everything from important purchases to working capital, to monthly payrolls.  Contact us today to see if our trusted network of lenders can help you set up access to a line of credit.

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What is a Line of Credit?

A line of credit is a revolving loan that gives your business immediate access to funds within predetermined limits.  Lenders usually charge interest only on what has been borrowed, and no lump-sum payments are required.  Businesses with seasonal or fluctuating income often leverage a line of credit to smooth out their cash flows over the year, using the income from more profitable months to pay for credit used during less profitable months.

Secured
A secured line of credit uses your company’s assets to secure a lower interest rate and a higher credit limit. After the application process, your firm will gain access to a percentage of the real estate, equipment, or other asset value in the form of an open credit account. Thus, if the lender offers 80% of the asset value, a business with property worth $500,000 could leverage its assets to secure a line of credit of up to $400,000. As long as your business continues to satisfy the payment terms, the collateralized property will remain with the business.
Unsecured
In contrast, an unsecured line of credit does not require assets for collateral. Unsecured lines, however, usually have lower credit limits and more stringent qualifying criteria than secured lines. To qualify for an unsecured line, a business must have a strong record of on-time payments and be able to demonstrate financial soundness. The benefit is that business assets are protected if problems arise in satisfying loan payments.

Advantages of Lines of Credit

  • Obtain access to flexible and immediate funding
  • Pay interest only on what’s been borrowed.
  • Access lower interest rates than credit cards.
  • Increase your credit score via regular on-time payments.

Frequently Asked Questions

01

Is a Line of Credit different from a credit card?

Yes. While both are forms of revolving credit, a line of credit typically has a higher borrowing limit and a lower variable interest rate.

02

When are Lines of Credit not a good fit?

Typically business lines of credit have a $250,000 maximum. If you need to cover major expenses like vehicle fleets or real estate purchases, consider contacting us for other specialized financing options.

03

How does my credit score affect my application?

When establishing a line of credit, lenders often look at both personal and business credit histories, in addition to your cash flow and annual revenue figures. However, qualifying for a secured line of credit is a bit easier, since your business assets are used as collateral.

04

When is the best time to get a line of credit?

It is usually better to acquire a line of credit for your business before you experience an immediate need for one. When cash flow is higher and finances are stable, you are more likely to qualify for great rates and payment terms.

05

When are Lines of Credit not a good fit?

Not everyone needs to keep an open account, nor is every business adept at managing revolving credit. If your business has short-term needs but doesn’t anticipate borrowing frequently, we can help you find alternative lending solutions.

06

How do Lines of Credit affect my credit record?

Lines of credit impact your score in the same way that credit cards do. Having an open account with a low balance can be a positive influence on credit. Conversely, carrying a high balance or making late payments can harm your credit score.

07

Can you refinance a Line of Credit?

Yes. In most cases, you can replace a line of credit with another line. This essentially involves opening a new account and transferring your balance before closing the old account. It’s best to double-check your line’s terms and conditions before opening a replacement account. If you’re looking for a new line of credit, we can help!