Business line of credit: what is it and how does it work?

23 October 2020

Many small businesses require a business line of credit to get the business back on track but how exactly does it work?

What is a Business Line of Credit?

A business line of credit is a more flexible loan, as it allows the small businesses to have access to the resources to meet daily working capital needs and short-term financial necessities. Business lines of credit allow small businesses to apply and qualify for borrowed capital they need down the track. This finance loan is an easy way to keep cash flow and an alternative option to other business loans or a credit card. You can easily access to a fixed amount of capital, which can be used when needed to meet short-term business requirements and finance short-term working capital requirements.

How to use this business loan option:

  • managing fluctuations in cash flow
  • paying staff wages
  • cover unpaid invoices
  • buying inventory and urgent stock
  • repairing business-critical equipment,
  • financing a marketing campaign
  • paying suppliers

Applying for a line of credit might be the way to go if your business regularly requires access to fund to meet the company needs.

Subsequently, there are two business lines of credit:

  • secured business lines of credit
  • unsecured business lines of credit

Secured Business LOC

The secured business LOC needs the business to pledge specific assets as collateral to secure the line. Since a line of credit is a short-term liability however, the lenders will often ask for short-term assets, such as accounts receivable or inventory. Lenders do not usually require real property or equipment, to secure this type of business loan. Secured business loan interest rates may be on the lower side as there is appropriate collateral to secure your business line of credit.

Unsecured Business LOC

The unsecured business LOC does not require specified assets as collateral; however, a personal guarantee and a good credit profile with business track records may be required to qualify for this type of credit line.

business line of credit agreement

Additionally, interest rates may be slightly higher and unsecured credit lines are often smaller.

Applying for a Business Line of Credit with Sure Capital

As we have stated, if you are thinking of apply for a LOC you must keep in mind that most lenders will want to see your document that demonstrate financial records and trustworthiness.

At Sure Capital we unlock credit opportunities for your small business thanks to our 50+ business loan providers. Moreover, in 99% of the cases you can get fund in your bank account in the same day of the loan application.

What do you need to apply for this specific loan?

  • Bank statements
  • Bank balance
  • Income statements

Advantages of this funding option:

  • No minimum amount
  • Flexible term
  • Interest-only the amount drawdown
  • Set up within 1-2 days

Want to know more about our business line of credit option to help your business?  We can assist any business in reaching their goals in any type of industry. Check out our funding solutions and get in touch with us and our lenders.

Totally free process – ask about our pre-approvals with no credit checks.

If you prefer, call us now at 1300 198 154