You have many options when it comes to securing financing for your business, including applying for a loan or commercial lines of credit. While neither is better than the other, each has unique advantages and potential disadvantages to consider before submitting your application. It’s also important that you know the differences between financing options to ensure you select the best opportunity for your growing company.
What Are Business Lines of Credit?
If you have a home equity loan or a personal credit card, a business credit line works much the same way. The lender assigns you a credit limit, and you can receive funds up to that amount as often as necessary. You do not need to make payments nor do you accrue interest if you do not use the business lines of credit available to you. You may or may not need to pledge collateral to receive this type of revolving credit depending on the strength of your company’s credit file and other factors determined by the lender.
One especially attractive benefit with this type of business financing is that you can access funds repeatedly without needing to apply for new financing. It may also have a lower interest rate and other fees compared to obtaining a traditional bank loan.
Understanding Business Term Loans
When you apply and receive approval for a term loan, the lender forwards you one lump sum to spend as you see fit. You make a payment that includes principle and interest every month until you have paid the loan in full. Term loans often have origination fees and other costs as well. You typically need to begin repaying the loan within one month of receiving it, regardless if you have spent the money or not. This type of business financing is often most attractive for companies that need to purchase a large piece of equipment that will require several years to pay in full.
We are happy to discuss business lines of credit, term loans, and other financing options during a personal consultation. Please contact GP Solutions today.