When your business necessitates compensation for sudden needs, a loan is a practical means to solving this challenge. But what if you merely require a fraction of the loan at given times? The answer? A business line of credit. Here are reasons why your business will benefit from it.
Business Line Of Credit: A Brief Overview
A business line of credit or a BOL is one that permits borrowers to gain access to capital that is established at a fixed amount. Also referred to as a “revolving loan”, it is meant to fund short-term goals within business needs.
This tool for small-to-medium-business financing gives you room to borrow the loan without having to take out the entire amount straightaway. If all you need is a fraction of it, for the time being, you can do so. And the remainder will continue to be preserved as a part of your loan and loan contract.
Why A Business Line Of Credit? What Will Your Business Get Out Of It?
1. Amazing Flexibility For Utilization
As mentioned above, the main factor which differentiates a business line of credit from other types of conventional loans is its flexibility. “Flexibility” when it comes to pulling out the exact amount you need to immediately address business demands.
What this entails is that you can utilize small portions of the loan at a time and repay only that said small portion according to the drafted repayment plan for it.
2. Fewer Hassles For Repayment
Instead of paying for the whole of a loan spread out in a monthly-to-yearly plan, a business line of credit will allow you to recompense for the percentage you take out from it. For example, if you extract $1,000 from a $5,000 dollar BOL, your repayment terms and contract will revolve around the $1000 amount.
That being the case, you will have less of a burden to carry on the subject of paying back. And less of an interest rate to worry about as well, since said interest rate will be limited to the $1000.
3. Better Interest Rates Compared To Other Short-Term Loans
BOLs are favoured because even though they are classified under “short-term loans”, the interest rates allocated to them are usually lower than that of other classifications of a temporal lending and repayment status.
In fact, analysts compared that several business lines of credit have interest rates that are lower than that of standard credit card plans. This is to encourage entrepreneurs to be up to date with their repayments and on time, for that matter.
Be sure to make timely repayments for you to let interest rates retain at their originally contracted numbers.
4. Fast Approval
Traditional lending institutions like banks tend to be very stringent with business loans. Bad credit can instantly terminate entry submissions for loans. Not so with a business line of credit. Most BOL agencies are less draconian regarding approvals.
By the same token, loans can be applied for and approved in as little as 24 hours. A number of factors such as loan amount, business financial standing, and a lending agency’s policy on reviewing business accounts will affect this timeframe indefinitely. Having said that, you may very well hear back about your loan application within the same day of submitting it.