Common Mistakes with a Business Line of Credit

Business Line of Credit

Business lines of credit are beneficial for sustaining a small business through financial rough patches. The money is available on an as-needed basis, but unfortunately, some small business owners are prone to making some costly mistakes when applying for or using a business line of credit.

Applying Too Late – Lenders prefer to lend money to small business owners that do not appear to need the money. Applying for a business line of credit before you need to use the money will make you appear more financially responsible than if you wait until you need emergency cash to pay you monthly payroll one month. Instead, it is important to apply for business lines of credit long before you need to use them. This gives you plenty of time to build a relationship with your lender and show that you have trustworthy borrowing habits.

Being Unprepared – Anytime you borrow money from a lender, you need to be able to show exactly how you plan to use the money and how you intend to pay it back. If you do not have an immediate use for a line of credit, be prepared to show your lender how the money might come in handy in the future.

Abusing a Credit Line – Another common mistake when using a business line of credit is abusing the access to the cash. Just like a credit card, business lines of credit accrue interest and require minimum monthly payments on the amounts borrowed. Be sure to pay the money back on time, every time to avoid losing access to your credit line.

Substituting with a Loan – Some business owners believe that a small business loan can take the place of a credit line. However, a loan is a fixed amount of money that is available to borrow one time. If you take out a loan for a construction project and find that you later need more money to complete it, you will have to apply for a second loan. However, had you originally financed your project using a business line of credit, the money would have been yours to borrow as needed, which would not be a problem if you go over your original budget.

To apply for funding for your small business, use the form on the right to begin the application process.

For more information, go to Business Line of Credit at

Common Mistakes with a Business Line of Credit was last modified: May 8th, 2012 by Amit Kraidman
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