What is a Business Line of Credit?
A small business line of credit gives you access to the working capital you need when you need it without the obligations of a fixed term loan. With a business line of credit, you can draw as much or as little as you need as long as you don’t exceed your credit limit. You have the flexibility to draw and repay as many times as you see fit, as long as your business is performing the same way or better than it was when your line of credit was approved. You’ll only pay a fee on the portion of money you draw.
Secured vs. Unsecured Line of Credit
A secured business line of credit requires a business to pledge assets as collateral to secure the line. Since a line of credit is a short-term liability, lenders typically ask for short-term assets, such as accounts receivable or inventory. If the borrower is unable to repay the line, the lender may proceed to assume possession of the collateral and sell the asset in order to pay off the balance.
An unsecured business line of credit does not require a business to pledge assets as collateral to secure the line. Unsecured lines of credit typically require the business owner to have a strong credit profile and credit score, along with a positive business track record to qualify.
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Flexible Financing For Your Business
Unlike a term loan, a business line of credit allows you to run your business without having to apply for a new loan every time you need a bit of extra cash. And with ongoing access to working capital, you can plan for and better manage your business’s future cash flow with less stress. Your line of credit can give you the boost you need to take advantage of opportunities when they arise.
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One of the main benefits to having a business a line of credit is that it’s revolving. That means you can access the credit line when you need it, pay down the balance, and use the line again as funds replenish.
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Business Line of Credit Details
Advantages
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Only pay interest on the amount you use, rather than the total amount funded
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Flexible as long as you stay within your credit limit
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Great opportunity to build business credit
Disadvantages
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It can be difficult to increase your credit limit
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Have lower borrowing limits and fees and additional charges can add up if used irresponsibly
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Can be more difficult to qualify for
Will your business qualify?
Standard Business LOCs:
600+ credit score
12+ months in business
$15,000+ average monthly bank deposits
Startup Business LOCs:
680+ credit score
Utilization below 30%
No recent bankruptcy
Which documentation is required?
We at Mahomes Capital Funding want to make the funding process as simple as possible for you. Therefore, minimal documentation is needed for your application
Signed one page funding application
3-5 most recent months company bank statements (standard)
Full tri-merged credit report (startup)