Business Equity Line of Credit

A business equity line of credit is a flexible form of financing that enables you to manage a wide range of expenses. It works similarly to a credit card, where you’ll receive a credit line you can withdraw from as needed.

Learn why business equity lines of credit are some of the most flexible and accessible forms of financing on the market. We’ll go over how they work and the different ways one can help you grow your enterprise.

Business Equity Line of Credit: What is it?

A business equity line of credit, by definition, is a financial product that allows businesses to tap into the equity of their assets – whether it be real estate, equipment, inventory, or any other valuable property. It works similarly to a home equity line of credit, where homeowners borrow against the value of their home.

A line of credit can be an ideal resource for businesses that have a significant amount of equity tied up in assets. It can be incredibly flexible and cost-effective compared to other forms of financing.

How Does a Business Equity Line of Credit Work?

With a small business equity line of credit, you’ll gain instant access to a credit limit you can borrow from as needed. You’ll only need to pay interest on the amount of money you withdraw and you can use the funds for just about any type of business expense.

Unlike an unsecured business line of credit, a business equity line is backed by collateral. This is an asset of value your business owns that will secure the loan and protect the lender in case of default. It’s important to stay on top of your payments with an equity credit line, since falling too far behind could result in your asset being seized.

Your small business equity line of credit is based on the appraised value of your property. This is distinct from the market price or what you paid for it. The estimate you receive can be lower or higher than the market price depending on whether your pledging real estate that has gone up in value or equipment that has undergone wear and tear.

Once you’re approved for a business equity line of credit, you’ll be able to withdraw funds and put them to work almost immediately. You’ll have to make regular payments, but you may be able to reuse those same funds as you pay down your balance. In this way, business equity lines of credit offer a degree of flexibility to borrow and repay as you go.

Business Equity Line of Credit: Rates, Credit Limit & Terms

Business equity line of credit rates and funding amounts will generally depend on the asset you’re pledging, your business’s financials, your credit score, and other factors.

Business equity line of credit rates are typically variable and tend to be tied to market rates. When interest rates rise, the balance on your business equity line can become more expensive. But if they fall, you may be able to get by with smaller payments. The exact interest rates you receive will depend on your business’s financial situation as well as your credit score.

To get the best rate, you’ll want to compare offers with National Business Capital.

The amount of money you’re able to borrow, otherwise known as your credit limit, will be based on a percentage of your asset’s appraised value. Most lenders typically grant businesses a limit of up to 80% of the appraised value of their assets. This figure isn’t set in stone and can vary depending on your own qualifications as well as your lender’s specific policies.

Benefits of Acquiring Business Equity Line of Credit

As a business owner looking to expand or manage your cash flow, you’ll want to explore the many benefits a business equity line of credit has to offer.

• Accessible On Your Schedule: Once your credit line is approved, you’ll be able to make withdrawals and access funds in no time. Borrow as much or as little as you need on an ongoing basis – up until your credit limit.
• Flexible Usage: Funding can be put towards any business-related purpose. Whether you need to purchase inventory, invest in new equipment, or pay for marketing campaigns. A line of credit offers the freedom to allocate funds as you see fit – without having to go back and forth between a lender for approval.
• Leverage Your Assets: By using the equity in your assets as collateral, you’ll be able to leverage your existing resources without taking on outside debt. Plus, you’ll still retain ownership of your property. In most cases, you should still be able to continue using your assets for normal business purposes.
• Potentially Strengthen Your Credit Score: If you’re able to stay on top of payments and manage your balance, you may gain an opportunity to boost your credit score. This could potentially open doors to larger credit lines, better interest rates, and more favorable terms in the future.
• Cost-Effective Financing: In exchange for pledging collateral, lenders may be willing to offer more favorable rates. This can make equity lines of credit much more cost-effective than some other forms of financing like unsecured lines of credit or credit cards.

Who Can Use a Business Equity Line of Credit?

There’s no specific type of business that would be best suited for an equity line of credit. This financing solution can be a valuable resource for a variety of needs and situations.

If your business meets any one of the following descriptions, you may be particularly likely to benefit.

• Businesses With Heavy Assets: If a significant amount of your business’s net worth is tied up in heavy assets, you may wish to take advantage of the additional liquidity an equity line offers. Whether it’s machinery, equipment, or real estate – this financing solution converts latent value into working capital.
• Business With Ongoing Costs: Term loans are ideal when you have a set figure in mind for a project or purchase. However, expenses may not always be predictable. With an equity line of credit, you can keep borrowing on an ongoing basis (up to your credit limit) – which is ideal for ongoing costs like renovations, expansions, and more.
• Businesses With Small Cash Reserves: Every business needs a financial safety net to manage unexpected expenses. With an equity line of credit, you won’t have to worry about getting by on a rainy day. You can keep your credit line open, only borrowing when you need and only paying interest on the amount you withdraw.
• Businesses With Cash Flow Fluctuations: If your business experiences frequent cash flow gaps or follows a seasonal cycle, you may want to consider using an equity line of credit to smooth out your finances. Borrow as needed when things are tight and make larger contributions to your balance once revenue recovers. This way, you can keep your business running smoothly.
• Businesses Looking To Expand: Funding gives you the resources needed to make investments that push your business toward growth. Use an equity line of credit to expand operations, launch new product lines, or enter new markets. Plus, you’ll never have to worry about missing out on a time-sensitive opportunity again. The accessibility inherent in a line of credit allows you to jump on opportunities without delay.

Business Equity Line of Credit: Easy Application Process

One of the best parts about securing a business equity line of credit with National Business Capital, is that fast and simplified application process. Working with a bank or credit union could mean waiting weeks for approval. With our expedited process, you can get funding in as little as 48 hours.

Step 1: Gather Your Documents

It’s a good idea to start gathering your business documents and double checking them ahead of time. You’ll need to show proof of ownership as well as your tax returns and financial statements going back at least one year. Check out a complete list of required documents here.

Step 2: Complete the Online Application

Upload your required documents into the fully-encrypted and secured online portal. You’ll be able to track your progress in completing the application. If you have any questions along the way, National Business Capital offers a team of dedicated business financing experts for guidance. Get advice on the different financing solutions available for your business, how to put together a successful application, and more.

Step 3: Review and Select a Financing Offer

Once you’ve submitted your online application, you should start receiving offers for an equity line of credit within just a few business days. National Business Capital circulates your application within its exclusive network of over 75 different lenders. Which means you’ll gain a comprehensive overview of the different financing solutions your business qualifies for. Within a single interface, you’ll be able to compare offers and select the best one for your business.