What is a Line of Credit?
A Line of Credit, also known as LOC, is an arrangement between a lender where a maximum amount of funds are available for withdrawal. Unlike a business credit card, this maximum amount is very high (up to $100,000), and is often used to offset some of the day to day unpredictabilities that come with operating a business. At any given time, the borrower can withdraw up to the maximum amount on the line – and only pay interest on funds they withdraw. As the principle is reduced via incremental payments, available funds increase up to the maximum amount on the line.
How can a Line of Credit benefit my business?
A Revolving Line of Credit helps to take care of a company’s short-term operations. Unlike a traditional small business loan, the borrower does not need to use all the capital at once. This is great for managing fluctuating cash flow. For a growing business, having that flexibility can be vital. A Line of Credit can be used for handling cash flow issues, equipment purchasing, payroll, or anything in-between!
A revolving line
A Line of Credit is a revolving account. This means borrowers are able to use capital from the line continuously as they are paying the withdrawn amounts.