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REVOLVING LINES OF CREDIT
Whether you are a new or readily established business owner, you know how essential it is to ensure you have quick, reliable, and readily available funding.
There are a lot of options like small business loans, business and personal credit cards, revolving lines of credit, SBA loans, and it can be challenging to determine which option is best for you.
It’s why many businesses and business owners trust reputable and respected lenders, like Yardline, to guide them. And it’s why we want to provide you with all the information upfront so you can make the best decision for you and your business.
Let’s take a look at revolving lines of credit and the key things you should know.
WHAT ARE BUSINESS REVOLVING LINES OF CREDIT?
Any business line of credit offers individuals the ability to draw cash or capital as they need it and only pay interest on the amount they take.
Business revolving lines of credit take this a step further and come with even more benefits wherein individuals borrow money from lenders as they need it, repay with minimum payments, and then have the ability to borrow again. Plus, unlike lines of credit, revolving lines of credit can remain open until the lender or borrower closes the account.
This type of funding is extremely useful for companies needing capital for expansion or needing to cover expenses and support cash flow.
Keep in mind, however, that revolving lines of credit still have credit limits and interest rates will accrue unless you pay off the balance in full by the payment due date or the account has a zero percent introductory interest period.
PROS AND CONS OF REVOLVING LINES OF CREDIT
Pros
Draw funds as needed - The approved maximum amount of credit is available whenever borrowers need it meaning that they don’t have to go through the length approval process to get the cash. This is extremely helpful when business owners have unexpected expenses or advantageous opportunities arise.
Secured financing - Revolving lines of credit are secured by collateral, such as a home, a business, inventory, and equipment, resulting in lower risk and lower interest rates for lenders.
Pay less interest than credit cards - As they are secured with a wide variety of factors, business owners can submit a business plan or collateral in addition to their credit scores, to earn a decreased interest rate than a business credit card. Additionally, borrowers only pay interest on the money they borrow.
Flexible use of funds - Business revolving lines of credit do not have restrictions on what borrowers can use the money for. And, borrowers can draw the same funds again after they’ve repaid them.
Cons
Lower credit limits and funding than traditional loans - While they are more fluid, a revolving line of credit’s approved loan amount is generally much lower than a traditional business loan.Commitment Fees - Many revolving lines of credit come with commitment fees, which are due to the lender regardless of an existing balance. Though borrowers secure their options with the fees, if they do not have the capital to pay them, other lending options might be a better fit.
Higher interest rates - While they often come with lower interest rates than credit cards or loans, the interest rates are still higher than if business owners pay with cash.
Difficult to qualify - Without collateral, lenders are not as willing to offer borrowers the funding and capital they need.
HOW TO GET A REVOLVING LINE OF CREDIT?
As we’ve mentioned, revolving lines of credit often need collateral in order to qualify. This means the first step to applying for a revolving line of credit would be to identify assets you can pledge as collateral on the loan.
Next, choose a type of revolving line of credit and a lender. Options include a personal line of credit from banks and credit unions, credit cards, and home equity lines of credit (HELOC), which use a lender’s home as collateral. Additionally, different lenders specialize in different types of loans.
Once you determine the type of line and the lender you want, it’s time to apply. Some applications can be completed online, while other lenders may require you to review documents with a loan officer, private banker, or credit union representative.
Lastly, and once approved, you will accept the terms and close on your revolving lines of credit by signing a lien agreement and having access to the funds within a few days, and some as quickly as the same day.
HOW TO KNOW IF A REVOLVING LINE OF CREDIT IS RIGHT FOR YOU
Revolving lines of credit are some of the most flexible forms of small business funding available. With their indefinite term limits, no rules against using credit line funds and only paying interest on the funds you use, it’s a popular and worthwhile option for many business owners. Especially ones with urgent financing needs.
However, if you are a business owner needing to make a large purchase, like commercial real estate, the small lines and limits on business revolving lines of credit are far too small.
At Yardline, we ensure our applicants have all the information and resources they need to make the best decision for them.
With one, simple application, you’ll receive access to a suite of funding solutions, including revolving lines of credit, small business loans, business and personal credit cards, SBA loans, and so much more. Plus, we’ll be there to discuss your options and get you the funding you qualify for (from $5k to $20 million) in as fast as 24 hours.
Apply for funding with Yardline today and get some of the best rates and terms to meet your business funding needs.
