Where to Get a Line of Credit?
A line of credit can be a valuable financial tool for business needs, allowing business owners to access funds when needed. However, finding the right lender and getting approved for a line of credit can be daunting. For startups and new small businesses who need fast and flexible funding, where is the best place to get a line of credit?
Lines of credit are available through banks, credit unions, the SBA, and online lenders. For small businesses, traditional banks and credit unions are often challenging to apply for and get approved. However, the SBA and smaller online lenders are more willing to look at your total business profile and provide the best line of credit options available.
While applying for a first-time loan can be challenging for new businesses, it can be straightforward with the right resources and planning. In this article, I will cover what lines of credit are, where to get them, and the best options to receive instant funds.
What is a Line of Credit?
A line of credit (LOC) is a flexible funding option that offers the most benefits to new businesses, small businesses, or businesses with a seasonal cash flow. They work similarly to a business credit card and provide a revolving cash reserve that companies can use as they need.
Businesses that utilize this lending option have access to the funds whenever they need them and only pay interest on the funds they borrow. Further, companies can draw on the credit as often as they want, provided they don’t borrow more than the line’s cap.
Lines of credit can be secured, involving collateral, or unsecured. Secured LOCs provide better terms than unsecured LOCs due to the lower risk to the lender. Because startups can apply for lines of credit more immediately than term loans, unsecured LOCs remain a highly flexible funding option for new businesses.
Do lines of Credit Have Advantages Over Other Lending Options?
In general, the main advantage LOCs have is that they have variable interest rates and uses. This variability means you can use LOCs as often as you want as long as you don’t draw out the line. Further, you only pay interest on the amount that you’re currently using.
Additionally, lines of credit have minimal closing costs and don’t always require collateral. These advantages mean that LOCs are a flexible and readily available funding solution for small businesses.
However, the drawback of these loans is that they provide significantly fewer funds than term loans and are generally only useful for seasonal use or to cover unforeseen costs. Short or long-term loans are better applications if you need large sums to complete a project or purchase new equipment.
Where Are the Best Sources for a Line of Credit?
You can get LOCs through several lending establishments, each of which has pros and cons to consider. Generally, banks and credit unions can offer more funds with higher interest rates, additional costs, and requirements to access their loans.
Online lenders and the Small Business Association (SBA) offer comparable funds with better rates for small businesses. Overall, online lenders are the best source of lines of credit for small businesses because they can appropriately assess a business’s situation and offer the most competitive loan options.
Traditional Banks
Traditional banks are often the first place business owners go to secure a line of credit. These establishments can offer sizable funds for your business and have a trustworthy reputation nationwide.
However, for small businesses, especially startups, banks are a poor source of loans due to the following reasons:
- Banks have high-interest rates, especially if you have a low credit score.
- Banks have strict qualifications for loan approval.
- Banks have a lengthy application process.
- Banks have stringent repayment terms.
- Banks are more likely to require collateral.
Overall, banks’ main advantage is that they have nationwide locations you can quickly access if you’re on the move. Generally, these establishments are more suitable for personal loan needs than small business ones.
Credit Unions
A credit union is a not-for-profit financial cooperative owned and controlled by its members. These establishments are typically involved in the commercial growth of their communities and provide meaningful services to local businesses.
Credit unions are a sort of middleman between banks and online lenders for lending purposes. They don’t provide the same funding or regional placement as banks. Further, they don’t offer the same competitive rates that online lenders provide.
In some cases, because credit unions are typically invested in the growth of their local communities, they can be a local source for LOCs and other loans if other options aren’t available.
However, for most businesses, online lenders and the SBA are readily accessible and competitive lending sources that your small business can take advantage of.
Online Lenders
Online lenders are a trustworthy source of loans for small businesses, including lines of credit. These lenders are themselves small businesses and are the most appreciative of your business’ credentials and time in history.
The following are the benefits of getting loans through an online lender:
- Convenience and 24/7 availability
- Exceptional speed and an easy application process
- Total transparency about additional fees and closing costs
- Flexibility in available loan terms and more loan options
- Lower interest rates
Overall, online lenders can provide a better loan service because of their availability and consideration of your business. Online lenders take the time to know your goals and will give appropriate loan options for your situation rather than turning you away because you’re a new business.
Additionally, online lenders can pair you directly with the SBA to achieve the best loan terms available for small businesses. The SBA offers competitive lending options pairing small businesses directly with lenders and accepting the risk of the loan.
Get a Line of Credit Today With BitX Funding
Lines of credit are flexible funding solutions that small businesses can take advantage of to manage uneven cash flows. However, knowing the best place to get a LOC can be difficult. Fortunately, online lenders such as BitX Funding are the best source for small business funding needs.
We will work directly with you to assess your business situation and pair you with suitable lenders so you can get the funds you need to boost your business to success.
For more information on small business loans of all kinds, contact BitX Funding by phone, email, or fill out the form below.
Follow us on Facebook, Twitter, and LinkedIn!
Published by Chris Davies, Creative Copywriter at The Labate Group in Westport, CT.