For many of the estimated 33.2 million small businesses operating in the U.S., finding ways to grow and expand is challenging. Many companies have limited or uneven cash flow. While sustaining operations may be simple enough, reduced access to funds at critical moments could make seizing opportunities difficult, stymying a small business’s ability to grow. As a result, many consider getting a business line of credit to increase their access to funds.
Business Line of Credit Definition
A business line of credit is a financial product that operates similarly to a credit card. Once approved, a small business is assigned a borrowing limit representing the maximum amount of money it can borrow. Unlike a small business loan, the funds aren’t given as a lump sum. Instead, companies can use any or all of the credit line at their discretion.
Once the small business borrows money from the credit line, it will owe monthly payments to cover the borrowed principal and any interest. Interest rates can vary, often ranging from 8% to 60%, though some may come with higher APRs.