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(844) 860-2288
(844) 860-2288
(844) 860-2288
When business owners need fast capital, the first source that they turn to is credit cards. Borrowing funds for tomorrow and repaying in the future with interest. A business line of credit (LOC) works in a similar way as credit cards except it offers more flexibility and freedom. When business owners apply for any kind of financing, their credit is a major credit factor in obtaining a business line of credit. For business owners, a line of credit should be considered first versus credit cards.
Business owners fall into a trap of excessively using their credit cards which causes their credit utilization or debt to increase substantially. This would have a negative effect on their credit score. Smart business owners cannot use their credit cards as the sole source for cash. It works as a temporary solution to cover bills but not a feasible solution in covering payroll or paying majority of vendors.
Line of credit does not have the same impact on credit utilization as credit cards due. Some of the lenders do not report your payment history to credit bureau, so in the case of missing a payment it would not affect your credit score. It is critical to have a good understanding of each lender’s agreement. When using line of credit, you can draw the funds instantly when approved and repay it more flexibility than credit cards. One of the best attributes that a line of credit offers is that you pay interest only when you draw the funds. Also, you have the most control over your working capital needs.
With flexible terms and more control, lenders would auto debit your checking account which makes your life much easier. When comparing both options, line of credit rates are usually lower than credit cards. It also provides higher credit limits than credit cards. When businesses are trying to expand, having a higher credit limit is extremely vital. With credit cards you are limited. Business line of credit is a good layer to businesses operations and working capital requirements. Moreover, when unexpected expenditures arise.
When speaking with business owners, an unsecured line of credit offers more flexibility when applying for capital. Business owners have a major concern with agreeing to collateral part of the secured transaction, making unsecured line of credit more favorable.
Positive cash flow along with having enough working capital is extremely important to business owners. Using credit cards shouldn’t be ruled out versus business line of credit as a source of borrowing. Businesses that are well prepared financially should use both a line of credit and credit cards. Business owners on average have more than 2 to 3 active credit cards. Owners of large businesses have as many as 7 to 9 active credit cards. You should evaluate your business and determine what liabilities you can cover with both products. We strongly believe that having multiple financing sources is a healthy way in operating any business.
When choosing any option, you should pay careful attention to the terms and fees that are associated with any lender. Whichever option you decide to choose, just make sure to use both options responsibly. Many business owners take more debt than they could handle. Credit card debt cause many businesses to file for bankruptcy because there are no flexible payment solutions. With a line of credit, you have more flexibility in making your payments and lenders would offer a grace period when you fall behind. With credit cards, there is no set timeline for a payment forgiveness or grace period.
Business line of credit helps businesses to develop a relationship with the lender. The more you use a business line of credit, the more credibility you earn. With a good relationship you can expect to have lower rates, better terms and an increase in approval amount.
While you consider your options, you shouldn’t be discouraged in applying for a business line of credit if you have poor credit score or weak cash flow. We concentrate on other positive business factors such as time in business and type of business. We strongly believe low credit score is not the only measurement of credit worthiness or repayment of debt.
Lenders offer tailored financing solutions and applying doesn’t cost anything or affect your credit score (check with each lender). You shouldn’t worry about your working capital needs or business surprises. When it comes to obtaining capital for your business, we suggest using a healthy blend of both products wisely. Any business should never have one source of borrowing but multiple pathways to obtain fast capital.
We require a signed credit application that takes around 5 minutes to complete along with 3 months of most recent bank statements. During the funding stage, we ask for a voided check along with driver’s license followed by bank verification. On larger approvals, we may require additional documents such as financial statements for review and verification purposes.
At Creditfy, we use technology that enables us to provide fast approval within hours and at times. We have a seamless and quick funding process and our customers could receive the funds in matter of few hours after collecting all of the required documents. Apply when you’re ready!