Which is the Best Line of Credit for Your Business?
Growing your small business takes time and money. Take advantage of lines of credit to make the most out of your upcoming opportunities. Banks offer small businesses credit lines in a variety of ways. Since nearly a quarter of small businesses look at this type of financing, it is important to know what’s available in the credit marketplace. Choose the one that best fits your business and growth potential.
During the research phase, it is essential you know the difference between an unsecured and a secured line of credit. An unsecured line of credit is a popular choice for many business owners because assets are not required as collateral unlike a secured line of credit. However, a secured line of credit is seen as less risky and easier to obtain than an unsecured line of credit. There may be a difference in interest rates and credit limits between the two as well.
After you decide whether to go for an unsecured or secured line of credit, you must then decide if the line of credit is personal or business. A home equity line of credit or second mortgage is a personal line of credit for an average of ten years and can be used for business growth, education and more. Business owners don’t have to provide the same types of paperwork like business plans to obtain personal lines of credit.
A line of credit obtained through a traditional bank is typically more difficult than through other lenders. Banks require many supportive documents during application including registration information, tax returns for both the business and personal, financials of the company and more. However, the perk of using your bank is the benefits such as check-writing privileges.
Fintech or financial technology companies are sprouting all over the place and may be a nice alternative to a traditional bank. These companies rely on machine learning and data analytics. These companies offer lines of credit based on more than your FICO credit score. Since they rely on multiple measures done through a software program, they often provide a faster decision than their traditional counterparts.
Shop around the various lines of credit options. Compare the options based on the amount of paperwork involved, interest rates, amount of credit you need and repayment terms. One lender may come out as a perfect match for your business and its financial future. Your business doesn’t have time to waste. A line of credit might be just the boost your company needs.