The Right Business Line of Credit for Your Business
Funding a business is hard. Many businesses run into financial trouble, but there are ways out of it. Many financing and funding options are available for businesses of all sizes. Lines of credit are among the most popular that you can look into. In order to find the right line of credit, you need to know the options available to you.
Traditional Bank Line of Credit
When you need a line of credit, then odds are, you will check out your bank first. Most business owners will approach their primary bank for a line of credit. While a traditional line of credit has many benefits, it is also one of the hardest to receive. You have to go through a rigorous application process and undergo a lot of vetting. You need to have the proper documentation to prove that you are not a risk.
Real Estate Line of Credit
If you want to expand your business through purchasing real estate then you may want to use real estate lines of credit. A real estate loan does not require collateral, appraisals or even financial statements. Instead, lenders assess a borrower based on his or her personal credit score. Once approved for this credit line, you can draw from it as often as you want to.
Lately, financial technology companies have been trying to ease the burden on businesses seeking funds. These alternative lenders use metrics to gauge business performance and creditworthiness. If you end up qualifying for funding, you are given a line of credit that you can use for gaps in your cash flow. There is no paperwork involved with these alternative lenders.
Secured Line of Credit
If you want a secured line of credit, then you have to put down your assets against the loan as collateral. This is a temporary liability and the lender might accept your accounts receivable or inventory as collateral. You don’t always have to put down a large asset or even equipment as collateral.
Unsecured Line of Credit
Most business owners prefer unsecured options. The reason borrowers prefer this option is that it does not require you to put down any assets as collateral. Now, it is riskier to the lender and there may be higher qualifications. This option is best for businesses that have good personal and business credit.
Lines of credit are among the most flexible options for small business owners. A line of credit allows you to draw against a set amount as often as you need to, as long as you repay the money. Knowing your financial situation and credit score should help you decide which line of credit is best.