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What is a Revolving Business Line of Credit, and How Does it Work?

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This post was last updated on December 18, 2020.

Any business line of credit gives you the ability to draw cash as you need it and only pay interest on what you take. But, a revolving business line of credit takes that benefit to a new level.

Now that revolving lines of credit have once again become a viable financing option for small businesses, many are eager to jump on them—especially as the ongoing pandemic puts a financial strain on small businesses.

But what is a revolving business line of credit, and how does it work?

what is a business line of credit and how does it work

What is a Revolving Business Line of Credit?

A revolving line of credit allows you to draw cash as you need it, like a normal business line of credit. The key difference is that revolving business line of credit allows you to access additional funding after paying the balance down.

In many ways, they work just like a personal credit card. A business owner is given a credit line, from which they can borrow up to a certain maximum. Another similarity is that you don’t have to use the total amount at once, as you would with a small business loan.

Instead, you have the freedom to borrow only the amount you need at a time. You can chip away at your credit line, or use it all at once—the choice is completely left up to the business owner.

You can then put the amount borrowed—or a portion of it—back into the credit line, where it gets added back into the total. The amount you replaced becomes available once again, which you can immediately draw from.

This cycle of drawing the funds you need, replacing them, and using them again is where this type of business line of credit gets the “revolving” name from.

How to Use a Revolving Business Line of Credit

A revolving business credit line is hooked up to your account electronically, giving you immediate 24/7 access to your funds to use anytime you need, for any purpose.

This makes revolving credit one of the most flexible financing options for business owners that are often in need of capital at all times.

If your business has to make spontaneous purchases regularly, revolving credit lines may be the perfect way to prepare your business with the funds it needs to grow.

Here’s a quick example of how a revolving business LOC works:

Imagine you’re the owner of a small cafe that’s famous for its bagels. You have the opportunity to expand your building to take over the abandoned nail salon next door, but you need three key things first in order to do so:

  1. An industrial revolving bagel oven that costs $60K
  2. Patio furniture to seat extra people $5K
  3. And a boost in your inventory for ingredients and kitchen equipment.

You don’t know how much covering inventory will cost you, so you know you’ll need the most flexible financing option available, to avoid over borrowing.

You speak to a Business Financing Advisor, and agree that a revolving business line of credit would be the best option to finance your needs. Within 24 hours, you get a revolving business credit line with a $100K maximum, to be safe.

First, you take out $60K for your bagel oven. This leaves you with $40K left in your credit line.

Now you need $5K to purchase the furniture you need to seat a larger volume of customers. You take out $5K, leaving you with $35K left in your credit line.

You add up all the ingredients and supplies you need for the time of expansion, which only totals to $10K, leaving you with $25K in extra funds still on your credit line.

Instead of worrying about having borrowed too much, you have peace of mind knowing that you have the freedom to use these extra funds only if you need to.

You never have to use the $25K you aren’t using if you decide you don’t need to. Instead, you know that they’ll always be available for you to use, which will likely come in handy throughout the expansion process!

Grow Your Credit as You Grow Your Business

When you use your revolving business line of credit, you are in effect building your FICO without any effort.

And what’s more, your credit line can grow as your business grows, giving you more financial freedom to take your business to new heights however you see fit!

Normally, banks and other lenders take a frustratingly long time to review credit lines before they can grow to fit the needs of business owners.

Through National Business Capital, your business line of credit will be reviewed constantly to ensure that you get the funding you need, exactly when you need it.

Flexible Financing To Help You Through the Pandemic & Beyond

Like we mentioned, revolving business lines of credit make growing your business easier than ever. But now more than ever, this flexible financing option can help your business.

Because of the pandemic and the uncertainty it brought, many businesses are still in flux. If your business needs cash to get back to business, adapt, or branch out into a new market, then this might be the perfect option.

WIth extra cash on hand, you can weather the storm by putting it toward payroll, operating expenses, and other costs that cash flow won’t cover. Or, you can also invest in new income streams that will boost sales during and after the pandemic.

Whatever challenges or opportunities you encounter, a revolving line of credit can be your secret weapon.

Business Line of Credit Qualifications

If your business:

  • Makes a minimum of $120K in annual gross sales
  • Has been in business for more than 6 months,
  • And has a strong vision for success,

Then you have a 90% chance of getting approved!

Even more exciting is learning what you don’t need to qualify for approval! Revolving credit lines do NOT require:

  • Any Real Estate Collateral
  • Minimum FICO Scores
  • And Strong Extensive Financial Histories

Get a TRUE Revolving Business Line of Credit

Many lenders that promise revolving lines of credit do not deliver as expected.

In fact, there have been complaints from many of our clients about past lenders they’ve dealt with that tried to scam them with regular business loans and lines of credit without revolving terms, and the exclusive benefits listed above.

To get a TRUE revolving business line of credit, make sure you’re aware of all the terms and benefits detailed above and compare them to the offers you receive.

How Long Does it Take to Get a Revolving Business Line of Credit?

Typically, the funding process for a revolving business line of credit lasts only about 24 hours, but can be as little as a few hours.

Business lines of credit have one of the fastest funding processes out of all the financing options available because there’s no need for collateral or a minimum credit score.

Get your revolving credit line today, and get the freedom to grow your business on your own terms! Through our 75+ lender marketplace, we can help you find the best program for your business.

Apply now to learn your options!

Last Updated on December 18, 2020

National Business Capital is the top FinTech marketplace offering small business loans and financing. Harnessing the power of leading technology and smart people, we’ve streamlined the application process to secure over $1 Billion in financing for business owners nationwide.

Our Business Financing Experts work within our 75+ Lender platform to match you with the right option. Easily access the best low-interest SBA loans, short and long-term loans, business lines of credit and equipment financing all in one place.

We strengthen local communities one small business loan at a time. For every deal we fund, we donate 10 meals to Feeding America!

About the Author, Joe Camberato

Joseph Camberato, CEO of National Business Capital, developed a passion for business at a young age. Joe started his company in 2007 in his spare bedroom and has grown to secure over $1 Billion dollars in financing for small business owners nationwide. National’s team has an amazing culture and has been name the #1 Top Workplace on Long Island 3 years in a row and counting. Joe is a trusted financial expert who’s published more than 2,000 articles in the last 3 years. His articles have generated over 5 million page views and has been featured on blogs such as Google News, Yahoo, CNBC, Forbes Magazine, etc. His passion has also inspired him to build the "GrowByJoe” YouTube channel where he shares his insights into small business trends and tips for growth. Joe also holds a seat on Forbes Finance Council and is an active member of the Young Presidents' Organization (YPO), a global leadership community.

https://www.linkedin.com/in/growbyjoe/

https://twitter.com/growbyjoe

https://www.instagram.com/GrowByJoe/

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Disclaimer: The information and insights in this article are provided for informational purposes only, and do not constitute financial, legal, tax, business or personal advise from National Business Capital and the author. Do no rely on this information as advice and please consult with your financial advisor, accountant and/or attorney before making any decisions. If you rely solely in this information it is at your own risk. The information is true and accurate to the best of our knowledge, but there maybe errors, omissions, or mistakes.