What is business line of credit?
A business line of credit(LOC) is lending money to a business owner with interest as fees. LOC is a dept financing, where owner’s have to pay the money back over time. A line of credit is a revolving form of a loan, but it is different from traditional loan. It is depend from bank to bank, that line of credit will have fixed rate or variable rate of interest.
In line of credit, maximum lending money is decided before, and the owner can borrow any amount of money within its maximum limit. And, the interest will only be applicable on the borrowed money only, which is what line of credit is. The small business line of credit with Small Business Capital is the most valuable way you can receive funding and not throway major share of your business out of your hands to run the business.
Other than business line of credit there are also other LOCs like Personal Line of Credit, Demand line of Credit etc.
Here, is Why you should take up small business line of credit?
How to get a business line of credit application?
The application processing time for a line of credit is easy but time taking. So, you can’t afford anything wrong in paper work. It is best to prepare every document work before your application get declined.
Here, are the required document required for approval of Line of Credit application-
- You need a business bank account(current account)
- You need to submit your business licence, specially required to get business line of credit.
- You need to show last two years, business financial statement with self-attested by the owner.
- Your bank transaction history or statement for last three months.
- Your need to submit investment or deposit statement at other institute.
- Government issued ID-proof, this will prove your nationality.
- Income tax return statement
How does business line of credit beneficial than business loan?
In line of credit you don’t need to borrow full amount at a time. You can borrow small amount of money when you need it, and you only have to pay on the borrowed money only. It is beneficial for small business and new business, because you don’t have to borrow large amount of money at once.
Also, you don’t have to apply for multiple business loan every time. So, this saves your time from the complicated process of loan.
You can even start a business with nothing with the help of unsecured LOC.
Where can I apply for business line of credit in Canada?
In Canada, you can go to any bank having line of credit service. It will be easiest job if you have already have account in that bank, if your don’t have one you need to open first a business bank account. These are some of the popular banks in Canada-
- CIBC
- TD Bank
- RBC
- BMO
Why take up small business line of credit in Canada?
Line of credit is for business man and specially for small business. Let’s see why
- New Option to borrow money
Line of credit is a good option for borrowing money. It is a new evolved form of loan made for benefits of business man.
If you have line of credit approval, you can borrow any amount of money within limit without much hesitation. Just like Credit card.
The difference with Credit Card is that Credit Card is available to all the people and the borrow limit is much less. Whereas, line of credit is for those doing business. The limit of money that can be borrowed from line of credit is much more than that of credit card.
- Time saver
Once, you done with the paper work and you get approval. You then don’t need to apply again and again like business loan.
In loan, every time you borrow money you have to give proper document each time for approval. However, in line of credit it is a one time process.
You can borrow money with out wasting much time from bank with the help of line of credit. This can save you time as well as your business.
Access to fund is much easier in line of credit.
- Flexibility
You can borrow any amount of money, till the borrow limit any time. Line of credit provides flexibility which is a most important feature of it.
And, you only need to pay interest on the borrowed money not on the total limit.
In loan, you need to pay for the whole amount. But in line of credit you can take limited amount and pay interest on that only.
- Security
In business, you can’t say when there will be the need of money. It gets difficult to manage money during that time there is need. If you have line of credit, you can borrow money without hesitation of another loan or borrowing from others.
This provides security to the business man and promotes business man to take bold decision. You can use this line of credit to grow your business.
In case of emergency, you can use this funds and solve the problem immediately. Thus, this keep a peace of mind for the business owner and its improves the living of the people.
- Low rate of interest
The rate of interest is not fixed for everyone, its varies from business to business. Your rate of interest depend on your credit history, your business performance and the bank you are dealing with. Rates of interest can be low as 6% or 10% depends on your business performance and your bank.
If you can manage to get line of credit at low rates as possible, you can borrow money at very low interest. Also, you need to pay interest on the borrowed money only, so generally the interest is low if you manages to get line of credit at low rates.
The rate of interest is more for the unsecured LOCs.
- Funding
The start-up growing up, can take the help of the fund raised from the LOCs. There are both secured and unsecured LOCs available. This will help the potential start-ups to grow if the start-up failed to arrange funding.
However, unsecured line of credit is difficult to get approval.