Silver Linings in Credit Lining: The Line of Credit From Business Providers

Business expansion is one of the most fulfilling moments of any company in existence today because it means that the entirety of the business has fulfilled all it has as a small business. What is left to do is bring the whole idea to the next level in the form of necessary expenses. These may range from more specific items such as newer office equipment to expensive items such as new computer units and vehicles for transportation purposes. Of course, all is done for the company’s benefit, but there are times wherein this expansion is not possible without any help from other sources.

The main reason for this is its lack of capital or currency for expenses specific to its expansion. That is why some owners opt to apply for the business credit line from particular sources such as their regular bank. A business provider is one option that probable borrowers should consider as it has much more flexible standards than others. Nonetheless, there are reasons why small businesses turn to these loans for business expansion.

Business Line of Credit?

In the simplest terms, the business line of credit is a form of revolving financing that allows the borrower to withdraw funds up to the agreed-upon credit limit or amount of money. This type of loaning is considered flexible mainly because its interest rates only affect the amount withdrawn from the credit limit. For example, this means that an owner removing $7,000 of a $15,000 loan would only have to pay the interest of the former.

In actuality, the loan is much like a regular credit card. The only difference is that instead of exchanging money for goods and services, borrowers may use the line of credit to withdraw funds deposited directly to a bank account. From here, owners may use the funds from the bank account to make their desired purchases.

This is unlike the regular business loan, wherein the interest rate affects the entire amount borrowed. The flexibility of this loan is beneficial to those who plan on scheduling their withdrawals as they may not need a certain amount from the loan itself.

Interest Rates?

A prominent factor of any loan is the interest rate, and this is simply the compensation that the borrower gives to the loaner for their services. Among the many institutions offering loans, there are many different kinds of loans one may encounter.

The origination fee is the most common as this is calculated as a percentage of the limit required mainly by banks. However, this fee usually involves paying 2% of the total credit limit when the account opens. This presents a problem to businesses who need credit immediately but cannot afford the fee just yet.

Monthly or manual accesses are another type involving the loaner’s monthly fees periodically, as the name suggests. Again, these may be expressed either as a credit limit or a flat figure.

Draw fees seem to be the most flexible of them all as this involves taking the interest only from the withdrawn amount. This withdrawal charge is what one usually sees with business providers. Nevertheless, different businesses have different terms and conditions. Therefore, it would be practical to view them before deciding on the institution to loan.

Use For What?

The business line of credit is taken mainly because the company intends to improve and expand its business. This means that institutions may offer these significant sums of money for the borrowing group to cover their expenses if they can. The capital may also be used to anticipate unexpected or hard-to-plan expenses without having to secure financing repeatedly.

Qualifications?

Despite its flexibility, there are some standards that the business line of credit holds, and these vary per institution. In the case of business providers such as Idea Financial, they should note four aspects of the loaning business, which make them a viable option for funding. They are the following:

1. The business applying for a loan must have been operating for at least two (2) years. It is essential because it shows the loaning industry that the company would repay anything they borrow, proving its sustainability.
2. Monthly revenue is essential, and the loaning business should generate an income of at least $15,000. This ensures cash flow to make the future repayments, and it shows that the company is big enough for a line of credit.
3. A personal credit score of 650 or higher is essential as an intelligible loaner would not consider a borrower with a poor loaning record.
4. A sole-proprietorship or non-profit company shall not be considered for a line of credit as the focus is mainly on the size of the company and their ability to sustain themselves. Restrictions of this nature must not hold them back.

Applying?

The bank is a typical choice for loaning, and this is a good choice for many. However, banks are known for their many restrictions accompanied by an endless list of terms and conditions. One of the conditions is the origination fee which must be a turn-off for many.

Online lenders are another option for loans as approval is immediate, but the problem with this group of people is that they tend to be quite inconsistent. On the other hand, credit cards are only convenient due to building credit in paperless transactions.

Despite this, the business provider holds itself to be the best of all the other options as there are no origination fees that need to be paid. Not only is one able to build and preserve credit digitally, but it is possible to receive financial advice from an individual regarding the best purchases. The best part of loaning from providers is its same-day approval, a bonus for those looking for immediate funds.

It is great for a company to innovate and expand independently, but this is impossible most of the time as it requires a great amount of capital. However, help is readily available to those who need it, and it comes in the form of business credit lines. Nevertheless, the banks, online lenders and credit cards are viable options but inferior to the business provider.