Spokane Business Lines of Credit
Unless your business has the balance sheet of Microsoft, eventually you will need access to capital. Business financing is one of the best ways to seek that capital in order to meet your short-term obligations, expand your business, invest in people or purchase major assets such as facilities, vehicles or land.
Nowadays, many small businesses use financing to avoid making personal investments on these items. If you're wondering
how to use a business line of credit or the benefits behind this type of loan, you're in the right place. A business line of credit in Spokane, WA is a popular way for small business owners to retain their company’s capital and use outside debt on investments in order to purchase necessary assets.
Applying is free and will not affect your credit score.
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What Is A Business Line Of Credit?
The best way to describe a business line of credit (LOC) is as a revolving loan that grants you access to a fixed amount of capital that can be used to meet your short-term business needs. Your company gets a fixed amount of money that you can use for short-term operating expenses (paying suppliers, meeting payroll, etc.) or investments.
The good thing about this loan is that you can use it partially and pay interest only on the amount used. To apply for a business line of credit, you need to be a registered business along with several documents that you need to provide.
Interest rates may be fixed or variable, and some lenders charge a draw fee every time you access the credit line. In addition to these, there may be an origination fee, annual fee or a monthly maintenance fee if you don’t use your line of credit. For any line of credit you consider, you need to carefully read the terms offered to make sure you understand the fees that may be charged.
There is also a specified repayment period, where payments vary depending on the amount borrowed. Some lines of credit require a draw period when you can access your funds and make interest-only payments. Afterwards, there is a repayment period where the outstanding balance must be covered over a specific timeframe. With online lenders, you can also apply for short-term lines of credit that amortize (must be paid back) over a shorter period which is anywhere from six months to two years.
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How can a business line of credit benefit you?
A small business line of credit is a great way to maintain consistent access to funds and smooth out any gaps or cover changes in business expenses and revenues. If you think that your business is profitable and you don’t need to borrow, you will be surprised to see how many businesses keep a line of credit for any unexpected growth or expansion opportunities.
Here are a few examples of scenarios where your small business can benefit from a business line of credit:
- You have a solid opportunity to purchase new equipment, inventory or real estate at a reduced cost. You can use a business line of credit while waiting for cash flow to catch up.
- Your sales took a dip over the winter or summer months and your business is seasonal, a line of credit can help you weather the loss.
- Your clients take longer to pay for your products or services, you might need a line of credit to cover your business expenses.
- You landed a new client and now need extra capital to cover the cost of labor or supplies. A line of credit can help you cover the expenses.
For newer businesses, getting a small business line of credit might be more difficult as lenders require them to have several years of operations, revenue, and strong finances. At Business Loans Spokane, we have a simple application process. Contact us today to discuss your options.
How to Get A Business Line Of Credit In Spokane ?
As you can see, a business line of credit is a flexible way to cover expenses and capture opportunities. You can apply for this loan through a bank or credit union, online lender, business loan broker or an online marketplace where you can shop among various lenders.
The requirements that most lenders evaluate include the following:
- Personal and business credit scores, which vary but are very important considering this type of loan
- Time in business, where 2 years or more is ideal but there are other flexible options, too
- Revenues, which must be backed up by financial statements and/or tax returns
Similar to many other financing options, the best time to get a business line of credit is when you have a healthy revenue and cash flow. You are also more likely to qualify for the best terms in such cases, and are not required to use your line of credit (for example, you can only withdraw a portion of it).
Secured vs. Unsecured Business Line Of Credit
If you are interested in applying for a business line of credit in Spokane, WA, you probably heard the terms “secured” and “unsecured” lines of credit. The difference is simple.
A secured business line of credit requires putting up assets such as inventory or property as collateral. Failing to pay back the credit line bears the risk of seizure of those assets by the lender. On the other hand, an unsecured business line does not require collateral, but some lenders still require personal guarantees or a lien on a business’ assets.
A business line of credit works best when you need to finance short-term expenses. If you need a loan to cover large one-time expenses, a
small business term loan is probably a better solution.
At Business Loans Spokane, we pride ourselves on
working with small businesses in Washington. Our expert advisors are always here to answer your questions and help you decide which is the best financing option for your needs.