The world of business advice has a tendency to be melodramatic at times. Indeed, it’s not uncommon to flip (or click) to an article, report or book that warns about the latest problem (Great Recessions, ill-conceived government regulations, rogue nation states, and so on) that is gearing up to send your business straight to the dustbin of history.
However, there are times when sounding the alarm bell is warranted, because your business’s survival could depend on it. And getting the facts about a business line of credit — and steering clear of myths and misunderstandings — qualifies for this category.
So, to help you keep your business on-track for sustained success vs. an unwanted sell-off or shut-down, here are 5 things about a business line of credit that you need to know now, not later:
They aren’t business loans.
You may be reluctant to apply for a business line of credit because you don’t want to take out a business loan. However, lines of credit aren’t business loans. They function much like credit cards (but with much better terms and a lower cost of borrowing than most retail products). You only pay interest on the amount you borrow — not the full amount that is available.
You should apply for a business line of credit before you need one.
As you’ve experienced, there are two axioms on the business landscape: a failure to plan is a plan to fail, and change is the only constant. In other words: yes, you need to have a map so you know where to go. But don’t count on the journey being straightforward — because both obstacles and opportunities will arise. If you apply for a business line of credit beforehand and have it at-the-ready, you’ll be in position to pivot when (not if) a new situation arises. Otherwise, you’ll be forced to scramble to boost your working capital, which will take time, and will add to your cost, risk and stress.
You do not need collateral to get a business line of credit.
Banks insist that all borrowers pledge collateral to secure a business line of credit. This can be equipment, inventory, buildings, vehicles, securities, cash, and so on. However, banks aren’t the only organizations that offer business lines of credit. For example, at National Business Capital, we do not require collateral for some of our loans. Depending on your business situation, we have both secured and unsecured loans available.
You do not need excellent personal and business credit scores to obtain a business line of credit.
It’s the same story as above: banks insist on high personal and business credit scores, but at National Business Capital we have no problem approving business lines of credits for borrowers that have impaired or bad credit.
You do not need to be in business for a couple of years to qualify for a business line of credit.
With apologies for being repetitive: 2+ years of business history is a bank requirement. At National Business Capital, our clients only need 2-3 months of business history, and it’s not necessary to be cashflow positive.
To learn more about how a business line of credit could ensure that your business stays safe, strong and successful — and doesn’t risk heading towards a sell-off or a shutdown — contact us today. Your consultation is free, and there’s never any risk, cost or obligation. Find out why business owners like you across the country trust and recommend us as partners in their success story!