Business Line Of Credit FAQ
How can I Qualify for a Business of Line Credit?
You don’t need much to qualify for a business of line credit. The basic requirement is that your business must have been operating for at least six months.
Furthermore, your business should have a good credit score; that helps your application process. You must also have plans in place to repay the loan at the end of your draw period.
How much can I borrow with a Business Line of Credit?
Your credit limit is determined based on several factors, including revenue and liquidity. Once your credit limit is determined, you can withdraw funds when you need them as long as you haven’t exceeded that limit.
How long do I have to pay back a business line of credit?
Our payment plan will be determined during your processing period. Just like any long-term loan, you’ll pay your line of credit back based on your agreement.
Do I have to repay the business Line of Credit in Full?
No, you only have to pay back the amount you borrowed with interest. Let’s say you only borrowed 50% of your credit limit. You’ll only have to back that 50% with interest.
What are Types of SBA Loans?
The SBA loans have eight types to apply through SBA loan programs. Each option has its own advantages and requirements. Here are the types of SBA loans:
SBA 7(a) Loans provides a loan between $30,000 and $5million
SBA 504 Loans can provide financing up to $5 million
SBA 8(a) Business Development Loans can provide financing up to $4 million for services and goods and $6.5 million for product manufacturing
SBA Microloans can provide financing between $5000 and $50,000
SBA Community Advantage Loans provides up to $250,000 financing for business expansion
SBA CAPLines can provide financing up to $5 million
SBA Export Loans provides up to $5 million in financing
SBA Disaster Loan
What is a merchant cash advance?
A merchant cash advance allows a business owner who accepts credit card payments or has other payment or receivables streams to obtain an advance of the funds regularly flowing through the business’ merchant account. A merchant cash advance (MCA) is not a loan, but rather an advance based upon the future revenues or credit card sales of a business. A small business can apply for an MCA and have an advance deposited into its account fairly quickly.
What is a small business line of credit?
A business line of credit is a flexible loan for businesses that works like a credit card. Companies draw money from their credit lines as needed, only paying interest on the portion of money borrowed. As they repay the amount borrowed, they replenish the funds available. These funds can typically be accessed using a business checking account, credit card or mobile app.
What do I need to qualify for a business line of credit?
While there are several different factors that lenders consider, there are a few that are most vital, including:
Credit history. Your credit history illustrates the likelihood of you defaulting. While most lenders require a personal credit score of around 680, some lenders accept scores as low as 580 to 600. However, the higher your score, the better chances you have at securing a lower interest rate or higher loan amount.
Business revenue. Most lenders have a minimum annual or monthly business revenue requirement. This varies depending on the specific lender but can range anywhere from $10,000 per month to $250,000 per year. Online lenders typically have less stringent revenue requirements compared to traditional banks.
Time in business. Most banks require that a business has been in operation for at least one to two years, but some online lenders may only require six months. The longer the business has been around, the more stable it looks to potential lenders—and the lower interest rate you may receive.
What are SBA loans?
An SBA loan is a government small-business loan that can help cover startup costs, expansions, real estate purchases and more. This type of financing is issued by a private lender but backed by the federal government.
You apply for an SBA loan through a lending institution like a bank or credit union. That lender then applies to the SBA for a loan guarantee, which means if you default on an SBA loan, the government pays the lender the guaranteed amount.
What is a personal line of credit (PLOC)?
A personal line of credit is a set amount of money from which you can borrow (up to the limit) for a given period of time, referred to as your draw period. Similar to a credit card, you draw from the available balance only the amount you need, and you pay interest on that amount. Learn more about personal lines of credit.
Where to get equipment financing?
Equipment financing is a type of small-business loan designed specifically for purchasing machinery and equipment essential to running your business. You can use an equipment loan to purchase anything from office furniture and medical equipment to farm machinery or commercial ovens. A business lending specialist can assist you by phone or in person with any loan or line of credit application.
How can I get a first-time business loan?
When you apply for a business loan, one of the first things the lender asks for is your business plan. A detailed business plan explains how you plan to make money from all income sources, what your costs will be, where your market is and how you plan to bring your goods or services to that market. You should also decide on your business structure, such as a limited liability company or corporation, before applying for a loan and set up a bank account specifically for your business.
How can short term financing help a business?
Seasonal businesses are more susceptible to short-term cash flow issues than others. If your business experiences seasonal slowdowns or other regular cash flow issues, a short-term loan may provide the cash necessary to maintain production and make payroll during low-revenue periods. Just make sure you’ll have the funds to repay the loans when you need them.
What is a working capital loan?
A working capital loan is a loan that is taken to finance a company’s everyday operations. These loans are not used to buy long-term assets or investments and are, instead, used to provide the working capital that covers a company’s short-term operational needs. Learn more about working capital loans.