Pros and Cons of a Business Line of Credit

Business Line of Credit

Starting and growing your small business requires money, something which isn’t always available in large quantities when you are just opening up your doors or when you need to make an investment into your business in order to take it to the next level. A business line of credit might be just the right way for you to get help with funding your business. However, lines of credit aren’t right for everyone. Here’s a list of pros and cons of getting a business line of credit.

1. Business lines of credit are usually unsecured, so you don’t need to put your personal residence on the line as collateral. If you default on your account, your situation won’t be nearly as bad as if you had a secured loan.
2. A line of credit is open for a longer amount of time than a loan. You’ll have access to the money all the time and can use it as you need it. No more reapplying for loan after loan.
3. You can use the amount of money, up to the total amount available, that you need and will only be charged interest on that money. Lines of credit work in a similar fashion to credit cards. You only pay on what you actually use.
4. You’ll help your credit as you repeatedly use your line of credit and then make the monthly payments on time. Over time, you’ll see an improvement in your credit score.

1. If you are just starting out your business, you may not be approved for a line of credit. Some lenders have a minimum number of years in which you need to be in business before they’ll lend to you.
2. You might overspend by making extravagant or unnecessary business purchases. Since lines of credit work like a credit card, it’s easy to feel like there’s a seemingly limitless amount of money at your disposal.
3. Some banks impose extra fees on lines of credit for account maintenance and transactions. These can quickly eat up your profits and make it not worth the advantages.

Now that you know the pros and cons of business lines of credit, you can decide if it’s right for you. Remember to carefully weigh all of your options and consider the fees and interest rates. As a small business owner, you probably don’t have a lot of room to make financial mistakes.

For more information, go to Business Line of Credit at

Pros and Cons of a Business Line of Credit was last modified: January 25th, 2012 by Amit Kraidman
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2 Responses to Pros and Cons of a Business Line of Credit

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