Let’s go over the basics of what a line of credit is and how it differs from other loans.
Key Differences Between a Traditional Loan and a Line of Credit
With a loan, you will have a consistent monthly payment of the same amount typically. When it comes to lines of credit, you only make payments on the amount that you have taken out. Therefore, if you haven’t borrowed anything you don’t make a payment.
Also, lines of credit are a lot cheaper than a term loan up front. In business loans, there are sometimes closing costs for larger term loans. With lines of credit, there’s usually a very small closing cost, if there’s one at all.
Third, lines of credit are easily re-usable. Instead of having to sign another contract, once you pay off a line of credit, you can quickly use it again. This makes it very adaptable.
Business Lines of Credit
Business lines of credit, often times are the best choice for financing if you have a lower credit score. The business credit line gives you access capital to meet a variety of business needs. It’s a financial buffer for a fixed amount that you can use anytime to meet a current cash flow gap.
It is almost essential for any business to have a business line of credit. If an emergency hits, it can be hard to find any capital; However, if you already have the line of credit, it can be a lifesaver for you and your small business.
Personal Lines of Credit
Personal lines of credit work very similar to business lines of credit. You can usually find these at a local bank or credit union. As with any financial decision, be responsible and do your research. Look at different options, and find the best one for you. Try to avoid maxing out your line of credit and carrying that balance, as that could put stress on your financial situation.
Whether for business or personal use, a line of credit is a great way to provide a buffer for any unexpected accidents or opportunities you may face along your way.
Working With Sprout
Sprout is an online marketplace where businesses come to compare and save on small business loans. You go to www.SproutLending.com and simply fill out a profile or call us at 800-865-6057. Based on that information you provided, Sprout suggests the best matches depending on the amount and purpose of the business loan you are seeking. Last year, Sprout and it’s staff was responsible for over $100 million in loan approvals.