Business Line of Credit

This revolving loan is a flexible line of credit available to businesses for the short-term. The best part of this loan is that companies can draw as little or as much of the available credit as needed. As they pay back the loan, the amount in the line of credit replenishes, thus giving them the same amount of credit limit to draw from. This way, businesses can access more funds as and when needed.

When to Apply for Business LOC?

Business Line of Credit is best applied and used for short-term working capital requirements.

• It can be used for purchasing inventory
• Repair and maintenance of business equipment
• Financing or marketing a campaign
• Maintaining business cash flow

Types of Business Line of Credit

The business line of credit is of two types:

• Secured LOC: Approved against short term collateral or guarantee
• Unsecured LOC: Approved against personal guarantee or a general lien

Both of these are short-term loans, but unsecured loans are limited to smaller amounts and require a strong credit profile to apply for. They also incur higher interest rates.

How It Works?

• When a borrower applies for a Business Line of Credit, they gain access to a small pool of funds.
• Whenever a business requires, it can draw money from that credit pool in lieu of monthly or weekly payments along with the interest rate.
• Furthermore, there can be an annual fee and transaction fee applicable to LOC.