If you need an influx of capital for your business, usually the first thing that comes to mind is a business loan. However, many people don’t know about business lines of credit and their benefits. Business loans and business lines of credit are similar in that both help to fund your business, but differ in the flexibility of how you can utilize the funds, and how quickly you can receive the funds. A business line of credit offers a more general form of financing and can be used to help with the natural ebb and flow of business.
Who can benefit from a business line of credit?
Almost every business can benefit from having a business line of credit open and ready for quick access. Oftentimes business owners wait until they have a need to start looking for capital, but that can take weeks, months, or even years to gain access to the funds needed. A business line of credit offers relatively immediate access to funding short-term needs.
What is a business line of credit exactly?
A business line of credit is similar to a personal credit card. You can use the funds whenever you need to, but you can’t spend more than your credit limit. The difference between a line of credit and a credit card is that a line of credit gives you access to cash to cover costs, while a credit card doesn’t. There are various forms of lines of credit available, including revolving and non-revolving lines of credit. Revolving lines of credit are best for using small amounts of money over a long period of time, while non-revolving lines of credit are best used when a business has a large lump sum capital need. Discuss the best option with your banker to ensure your business is making the right choice.
Benefits of a business line of credit
A business line of credit can be used to cover operating expenses such as payroll, purchasing supplies, or other expenses you have for your business. The money that is used from your business line of credit then becomes a loan that you pay back over time, which allows businesses to make it through seasonal fluctuations without worrying about being able to pay employees wages.
Lines of credit also are easier to qualify for compared to traditional business loan programs, and they can help to build your overall business credit.
Where to find a business line of credit?
The first place to start is with your local business bank. Local banks, credit unions, and CDFIs can offer competitive rates to qualifying business owners and often work with businesses at all stages (from startup to established) to find creative solutions. As California’s first CDFI (Community Development Financial Institution), Community Bank of the Bay prides itself on working with businesses of all sizes, providing personalized attention, sound advice, and quick decisions to help you and your business meet its goals, learn more at https://www.bankcbb.com/business/loans.