Important Things You Need To Know About Short-Term Business Line of Credit – Part 1

FYI: there are 99.7% small businesses in the U.S and out of which 82% experience cash flow problems. Undoubtedly, poor cash flow is one of the biggest reasons for the failure of small and medium-sized enterprises. To manage and improve working capital, many small business owners go for short-term financing. Also, it can be affordable and convenient than many of its counterparts such as a bank loan or credit card.

In this blog post, I’ll explain what a short-term business line of credit is, where to get it, and how to qualify for it as a small business owner.

Short-Term Line Of Credit in a Nutshell

A short-term line of credit is a type of small business loan that can be used to meet routine working capital needs and fill other short-term and unexpected necessities. It works like a business line of credit but with an average loan term between 6 months to 1 year. These loans are an example of revolving credit and work like credit cards. With this small business financing, you can borrow a predetermined amount of funds- and repay only the amounts you withdraw and pay interest only on the portion of money you’ve used to make the funds available again.

Where to Get a Short-Term Business Line of Credit

There are several traditional banks and alternative lenders that offer short-term lines of credit to SMEs. Besides, you can also use a lending marketplace to apply and receive the loan. These advance and intuitive lending platforms help businesses find and compare a variety of short-term lines of credit offers, sold by multiple lenders.

The loan amount, rate of interest, and cost to business vary from lender to lender. Typically, a short-term line of credit can range from $K to $10K. Depending on your credit history, you may be offered an interest rate from 7% to 25%. If you go through an online lending marketplace or an alternative lender, you may receive your funds in as little as 24-48 hours.

How to qualify for a Short-term Business line of Credit

Though it is one of the most business-friendly funding options, a business line of credit can be easy and tough to qualify depending on your lender. So, what exactly does it take to qualify for one? Here are some important requirements you may need to qualify for this flexible and sought-after small business financing.

• Time in Business: At least six months of business history
• Annual Revenue: Proof of business annual revenue and business health.
• Personal Credit Score: Must have a personal credit score of 500 and above
• Collateral: Depending on the lender, you may have to put collateral like accounts relievable, inventory, machinery, real estate, and financial instruments.
• Guarantee: Need to provide guaranteed if you’re an independent small business owner or if your company is a subsidiary of a larger big company.

Bottom Line

A short-term business line of credit can be an important can be an important tool to smooth uneven cash flow and fund other profit-generating initiatives. I still have some more important things to share with you, so make sure you head back to our blog part 2 to discover the other vital information on this flexible and popular small business funding option.