Looking into the funding options for your small business is bound to bring up many things that are unfamiliar to you, as well as ones that are familiar but may work differently than their private funding option cousins. Small business lines of credit may fall into both categories and can be one of the easiest to use and qualify for.

What Are They?

Simply put, a credit line for a small business is essentially the same as a personal credit card because it is generally unsecured and revolving debt. Opening a credit line through your bank for your small business may be a credit card with a higher balance than most personal cards, which may be accepted in more places. You can also open credit lines through your suppliers or third parties for your company. The main features of this funding type are that you have a loan limit, monthly payments, and the ability to borrow and repay the amount up to your limit repeatedly.

How Do You Use One?

The way to use small business lines of credit largely depends on your type. If you have a credit card from your bank or a third-party lender, you will use it the same way you use your personal one, swipe it when you pay for business expenses, and then make a payment when your statement comes. Credit lines from suppliers may work the same way, but only for purchases made with that vendor, or they may be more similar to an advance or invoice factoring. You can sometimes show your supplier that the order for your products using those supplies has been submitted by a reputable customer and make a deal to repay the credit line with the payment you receive from that client.

What Are the Qualifications?

The qualifications for business credit lines depend on who is extending that credit. In general, however, these are unsecured loans and usually depend on your credit history and ability to repay the amount promptly. Some suppliers will require that you have an excellent working account with them for a minimum amount of time or that it has been a specific timeframe since your last line was closed. Lines not heavily dependent on your credit history are likely to have higher interest rates and more strict repayment terms.

Business lines of credit are an excellent way to get the funding you need quickly and on a revolving basis. This loan type can help you weather off-seasons with enough work to keep busy and funds to keep the lights on. They can also help achieve growth goals such as paying for the supplies for larger projects or new product lines.