5 Common Myths About Business Lines of Credit

Estimated read time 3 min read

Are you thinking about applying for a business line of credit? Lines of credit aren’t limited to consumers; many banks and alternative lenders offer business lines of credit. You can use them to cover your business’s expenses. Before applying for a business line of credit, though, you may want to read the following myths about them.

5 Common Myths About Business Lines of Credit

#1) Requires Monthly Payments

With a business line of credit, you’ll only have to make payments when you borrow money. Business lines of credit aren’t the same as business loans. From the moment you get a business loan, you’ll have to make payments — typically on a monthly basis.  A business line of credit is a revolving credit account, so you’ll only have to make payments if and when you borrow money from the account.

#2) Must Be Secured With Collateral

There are secured business lines of credit, and there are unsecured business lines of credit. Secured business lines of credit require collateral. You’ll have to pledge assets of monetary value when applying for them. These assets will be used as collateral in the event of default. Unsecured business lines of credit don’t require collateral. They have a more stringent approval process, but they won’t place your assets at risk of seizure in the event of default.

#3) Applications Are Time-Consuming

Applying for a business line of credit isn’t necessarily time-consuming. Many banks and alternative lenders have streamlined the application process so that business owners can apply more quickly. You may be able to apply for a business line of credit online, in fact, thus eliminating the need for visiting a local banking branch.

#4) Only Available to Large Businesses

Another common myth is that business lines of credit are only available to large businesses. Contrary to popular belief, they are available to businesses of all sizes. Business lines of credit, in fact, can be a particularly valuable resource for smaller businesses. According to recent data from the Small Business Administration (SBA), SMEs account for over 99% of businesses in the United States, and most of them require financing to get up and running.

#5) High Closing Costs

Think business lines of credit have high closing costs? Think again. Many of them have little-or-no closing costs. This is in stark contrast to business loans. For a typical business loan, you can expect to pay around 2% to 7% in closing costs.

This article was brought to you by Intrepid Private Capital Group, a Global Financial Services Company. For more information on startup and business funding, or to complete a funding application, please visit our website.

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