If you need business financing, there are a lot of options available. A traditional business loan is the best-known option, but is not always the best for every business. A business line of credit is another option available. It may be thought of like a loan, but it is different. Knowing the difference between the two can help you decide which option is best for you.
Business Line of Credit
A business line of credit provides access to a set amount of money that can be accessed when needed. You are not required to use it, but it is available. If you use this money, you repay what is used based on agreed terms. Repaying what is used returns your line of credit to the initial amount. For example, if you have a line of credit of $4000 and use $2000, your available line of credit is only $2000 until you make your repayments. At that time, you once again have access to $4000.
A business loan provides you access to a lump sum of money, usually at a fixed interest rate, with a set repayment plan. However, once you are given the money, it must be repaid whether you use the money for purchases or not. Simply the act of borrowing the money commits you to the repayment. The terms of the loan depend on a number of factors, including your business credit history and the amount you are borrowing. Many loans have multi-year terms, which includes a monthly bill until the loan is completely repaid.
If you need financing for your business, it is important to select the best option for your needs. Whether you go with a business line of credit or a business loan, you will be able to get the financing you need to achieve your business goals.