A line of credit is a type of financing in which a bank, financial institution or a lender, provides you with a number of funds for a certain amount of time, which depends on the size of your business and your financial capabilities. A line of credit is a form of revolving credit, and this means that your credit is automatically renewed while you pay off the debt.
For example, let’s say you receive a line of credit of $ 30,000 and every month you withdraw $ 5,000. Each time you make a withdrawal, you will only be responsible for paying that amount plus interest. You can continue withdrawing until you reach the limit, and when you settle the debt, you can withdraw the amount you want when you want. You can request an exact date to pay the loan, as you can also pay in increments.
Unlike credit cards and traditional loans, a line of credit gives you access to cash without additional fees, and they have lower interest rates.
How should a line of credit be used?
A line of credit can be used to cover deficiencies in the flow of funds, obtain more capital to invest, or to cover any need or emergency that is presented to your business.
Lines of credit are more beneficial when used for repeated problems of cash flow and not for specific purchases or investments. However, that does not mean that they can not be used for all business needs.
For example, if you realize that in your business you need $ 3,000 every month to buy necessary material because some customers still owe you, it is a good idea to have a line of credit from which you can withdraw just what is necessary.
This is a way to cover that expense every month without having to reapply for a loan. If some month you need something else for an emergency, the line of credit can also alleviate that situation.
At Juan Marret you can get your line of credit as fast as 30 minutes with one of our partner lenders. If you meet the following requirements:
- 1 year in the Business
- At least 500 points on your FICO Score
- More than 50,000 annual business income
- You deposit more than 6 times a month in your bank account
- Apply here and you can get it as easy as 20 minutes.