An Introduction To Lines Of Credit

Unlike business loans, lines of credit are extended to the borrower, and therefore, they are a sure way of getting funds for various business projects. One of the most significant advantages of these funds is -that they provide a continuous flow of cash, and so, they can help you in your day-to-day operations.

Such credit is meant to help you meet short-term needs, and so, you need to know how to plan appropriately to get the best out of it. By providing you with an ongoing source of funds whenever you need it, a line of credit makes it easy for you to grow your business. Here are some of the types of credit that you can try.

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Revolving Lines of Credit

With revolving credit, you are given a limit in your account within which you should operate. It means that you can make multiple withdrawals from the account, and each withdrawal will be considered as one loan. As long as you have not surpassed your limit, you can borrow again. You can also make partial payments to restore your limit and continue borrowing. With time, the lender might increase your limit based on your account usage.

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Non-Revolving Lines of Credit

A non-revolving line of credit is similar to a revolving one only that, in this case, funds can replenish. You will notice that when you make a withdrawal from your account, the lender treats it with special terms and conditions. It means that you cannot expect the same conditions that you used on a previous loan to roll over. However, you can also make several withdrawals that are independent of each other.

Secured Lines of Credit

With secured lines, you have to put up some form of collateral to be eligible for borrowing. Collateral can be your business assets or anything else that you own. Owing to their nature, the amount that you can access depends on the value of your collateral, and so, you are the one that determines how much you get. You are also free to change your collateral any time, depending on the terms.

Non-Secured Lines of Credit

A business owner can tap into unsecured lines of credit and pay the money repeatedly without having to deposit any collateral. It is one of the most popular LOCs because most small businesses hardly have any form of asset to put up as collateral. In addition to that, it is a high-risk lending option, and therefore, you can expect the terms to be a little different from what you will get with the secured option.

All these lines of credit are useful to businesses depending on the specific needs of the borrower. You may want to assess your daily, weekly, or monthly financial needs and determine the LOC to choose. Pay attention to how you use your account because it determines how much credit the lenders will extend to you. If you have not been using any line of credit, it is time to tap into one and enjoy the benefits.

If you want to learn more about business loans such as working capital loans or equipment leasing and financing solutions, do not hesitate to contact CMS Funding today.