How To Get A Line Of Credit For Business

How To Get A Line Of Credit For Business

Need funding to get your business flowing? Learn how to get a line of credit for business. A LOC works similarly to a credit card & there are so many benefits!

A line of credit for business is one of the best ways to get your business off the ground and running with access to the funds you need to achieve this. Also referred to as a LOC, it’s a type of finance that gives your business access to an agreed credit limit, where you are only charged interest if you withdraw and use the money.

You have the funds available to you at all times should you need them, and only have to withdraw as much as you need, placing your business in the best position to succeed.

What Is A Line Of Credit For Business?

A line of credit for business means you have access to funds when you need them, without having to get approval from your lender or applying again. You only pay interest on the amount you use, unlike a regular loan. This means the amount of interest your business accrues could be less overall if you don’t end up accessing all the money. It’s a handy safety net to have should you need it, without paying for it in the process.

Let’s take a look at an example:

A business is offered a line of credit for business to the amount of $100,000. A few months later, the business withdraws just $50,000. This the amount accruing interest is the $50,000.

Types Of Lines Of Credit

You have two main options available to you: a secured line of credit for business or an unsecured line of credit. In general, most are unsecured, but here’s the difference between the two:

  • Secured: this is where you offer up an asset as collateral against your loan. Normally you have a property that you can use the equity to secure the loan with. This has many advantages, including offering a lower interest rate and higher loan amounts. However, the lender does have the security of your property backing the loan.
  • Unsecured: This is when you offer nothing up against the loan. It comes with higher interest rates, as the lender is taking all the risk in this scenario. You will need to have a good credit history in most cases to take out an unsecured LOC.

You also have the choice between a revolving or non-revolving line of credit:

  • Revolving: this is where you as the borrower can take out funds multiple times up to the maximum pre-approved line of credit offered. Once they have repaid their first loan, they can take out another loan for up to the same pre-approved amount, as many times as they like for the term of the loan. The interest is only paid on the funds that you take out, while the remainder sits there in case you need it at a later time. It gives the borrower the flexibility to use as much credit as they need on a continual basis.
  • Non-revolving: this is quite similar to the revolving line of credit, with the pre-approved amount available to the business. However, once a portion of the loan amount is used, it doesn’t get replenished. You can only use the remainder of the balanced funds during the term. Once the amount is repaid, the line of credit is closed and can’t be used again.

How Do I Apply For A Line Of Credit For Business

Getting a line of credit for business for your business is a fairly straightforward process. You can either apply through a traditional institution such as a bank, or a non-traditional institution.

Your eligibility for a LOC will depend on the lender you choose to go with. Many banks will only of a LOC to established businesses with strong trading history. However non-bank lenders tend to have less stringent criteria. Here is what is generally expected:

  • You have been trading for at least six month.
  • Have an ABN (Australian Business Number).
  • Are registered for GST.

Setting up a business line of credit often involves a set-up fee, along with ongoing maintenance fees, so make sure you take these into consideration before applying. You will also need more documentation depending on where you are applying. Be sure to check your lenders requirements ahead of time.

Take Out A LOC Today

If you’re ready to take out a business line of credit, then speak to the professionals at ALC Commercial today. We provide no credit check business loans from $5,000 to $500,000, so your business has access to the funds they need when they need them.

Whether you’re a start-up or a seasoned business, we have a range of loans on offer, so your business has the opportunity to succeed and grow. Even if you have a bad credit history, we have a choice of loans to get your business off its feet.

For more information on business loans, commercial finance, debt consolidation, bad credit business loans and low-doc business loans talk to our experienced and understanding loan specialists to see how our business loans can support your business goals.

Share this post

You may also want to read...