A business line of credit works much like a regular consumer credit card, the borrower will provide you a credit limit, and you can start using it as you see fit. As you start paying down the outstanding balance, you’ll see the available credit amount.

LINE OF CREDIT VS TERM LOAN
A-Line of credit is the perfect option for quick and short-term working capital, Term Loans are the best option for one-time funding of large purchases.
The qualification requirements for both of these funding options are similar:
- Business’s income
- Business’s age
- Business owner’s personal credit score
- Available collateral

FUNDING WITHOUT COLLATERAL?
Traditional banks may not be able to provide the funding you need. Banks generally have higher minimum requirements, which often include lien or collateral of your assets. For lower credit limit lines, some online lenders will use criteria other than available collateral (such as being in business for at least one year) to make their funding decisions.

WHAT IS THE MOST AFFORDABLE OPTION?
Lines of credit offered by banks typically have lower interest rates than those offered by online lenders. However, banks typically offer longer payment terms, so you’ll end up paying more in interest in the long run.
An online lender will offer a shorter payment term so, although the interest rate is higher, your total interest costs will end up being lower. Also, the bank’s application process can be lengthy so if you’re seeking funding to take advantage of a profitable time-sensitive business opportunity, an online lender may be the best option.

LOC INTEREST RATES
Banks usually offer the lowest interest rates, 9% to 25%. While the interest rates are lower than those of online lenders, their payment terms are generally longer. You’ll save money in monthly payments, but the overall cost of the line of credit will end up being higher.
An online lender can offer anywhere from 30% to 50% in interest. Quickly paying the outstanding balance will help you to save on interest costs.