Personal vs Business Lines of Credit: What’s the Difference?

Are you thinking about applying for a line of credit? Many entrepreneurs use them to finance their businesses. It’s a form of debt financing that’s offered by banks and alternative lenders. With a line of credit, you’ll essentially have access to a revolving credit account with a fixed borrowing limit. There are personal and business lines of credit, however. While they are both flexible financing solutions, they differ in several ways

Personal vs Business Line of Credit: What’s the Difference?

What Is a Personal Line of Credit?

A personal line of credit is a revolving credit account that’s opened by an individual. Like with loans, there are personal lines of credit and business lines of credit. You can apply for a personal line of credit using your own personal credit, which is tied to your Social Security number.

What Is a Business Line of Credit?

A business line of credit is a revolving credit account that’s opened by a business. Businesses can apply for loans and lines of credit. Loans, of course, aren’t revolving. They consist of a one-time cash influx. Lines of credit are different in the sense that they are revolving. As you pay down a line of credit, you’ll be able to borrow more money from the account. Regardless, a business line of credit is a revolving credit account that’s opened by a business.

Differences Between Personal and Business Lines of Credit

Personal and business lines of credit aren’t the same. Personal lines of credit are opened by individuals, whereas business lines of credit are opened by businesses.

Personal lines of credit are usually easier to obtain than business lines of credit. When you apply for a business line of credit, the lender will typically scrutinize your business’s cash flow and credit history. If your business has poor cash flow or bad credit, the lender may reject your application. Personal lines of credit are easier to obtain. As long as you have good personal credit, the lender will typically approve your application.

Another difference between personal and business lines of credit involves the borrowing limit. Both types of lines of credit have a borrowing limit. Business lines of credit, however, typically have a higher borrowing limit than their personal counterparts.

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.