Business Lines of Credit: An Introduction

Lines of credit for businesses are common and offered by many banks. But what exactly is a business line of credit?

Simply put, it is money for your business that you can access at anytime for your business. The bank or lender you deal with will set an amount that you can borrow up to. Under normal terms, a business line of credit does not require collateral unless your credit score is not high enough.

The advantages of a line of credit are useful to insure enough working capital to cover short term cash flow needs for your business. Also it is helpful if your businesses has seasonal increased expenses or other unplanned expenses that arise.

Your financial lender will carefully look over your businesses financial history as well as projected income to determine the amount of your line of credit. Since a business line of credit is similar to a credit card, most lenders to not have a fixed payment term and the interest rate is adjustable depending on the market.

Depending on the terms you and your lender agree upon, some only require a payment to cover the interest on a monthly basis. As with any type of loan, it is recommended that the funds available are only used if it makes financial sense for your and your business.