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.

Comments

Post a Comment

Popular posts from this blog

How To Compare And Choose the Best Small Business Loan Offers?

Image
Ready to start your dream business? Want to relocate your booming business? Need cash to buy new business’ equipment? Or want to boost cash flow to manage day-to-day business operations? A small business loan may be able to help you in such situations.    Today, many innovative and intuitive online lending marketplaces are a preferred choice for both young and veteran entrepreneurs to secure a business loan. These innovative and intuitive online lending platforms that showcased a variety of loan offers from multiple lenders made it easier for you to apply and secure the best small business loan that best fits your budget and needs.    Though there hundred of alternative lenders and a variety of offers to choose from, it’s always challenging to compare the loans to figure out which one is perfect for your small business. Here are some of the many important factors to help you find the right financing for your current financial circumstances.    Int...
Read more

More Robust and Real-Time Data: Essential Ingredient for Financial Institutions' Success

Image
The future of any financial institution depends on what quality of products and services it offers to its customers today. This quality is fueled by its underlying data. With accurate and real-time financial data properly accessed, lenders can create new and innovative solutions to meet and satisfy their customers’ unique needs - just like Netflix and Amazon do today. Because there are different sources of data and several data attributes can affect lending decisions, how can you make the most of the data? Merely collecting your customers’ data is not sufficient, you need to convert it into meaningful information. Fortunately, you can achieve that through data standardization and normalization. Today, FinTech innovators leverage ground-breaking technologies such as artificial intelligence and machine learning to provide lenders with the most robust and real-time financial data. You can access and use this data to serve your customers better and take your financial institution forward. ...
Read more

How Open Accounting Can Help Lenders Offer Great Small Business Loans

Image
Small and medium-sized businesses play a vital role in the economic development of a country. They often require funds to successfully run their operations and take their venture to the next level. SMEs need funds for a variety of purposes in their businesses, from buying real estate to paying off debt, boosting cash flow, purchasing equipment, hiring employees, and covering day-to-day business expenses. What are the Challenges SMEs Face When Accessing Funds? SMEs face numerous challenges when accessing loans. First, the application process for SMEs is still a complex manual. Moreover, the paper-based processes and endless documentation requirements of traditional lenders make it difficult for SMEs to get the desired loans Because most small and medium-sized businesses have no or limited credit history, banks are usually reluctant to provide loans to them. How Open Accounting Can Help Financial Institutions Provider Greater Access to SME Lending? Since SMEs represent a major fu...
Read more