![]() There are a few key differences between business lines of credit and business loans. The best business lines of credit feature competitive interest rates, low fees and flexible loan terms. Unlike a business loan, which is disbursed as a lump sum, borrowers can access lines of credit on an as-needed basis, and interest only accrues on the outstanding balance. Lines of credit are similar to credit cards in that the borrower can access cash up to a certain limit, pay it back over time and then withdraw the same funds repeatedly during the draw period. Choose a line of credit that has the potential to grow with your business so you’re not stuck with financing that doesn’t meet your needs down the road.Ī business line of credit is a type of financing that provides companies with access to capital to cover operating costs and other ongoing expenses. As your business grows, you’ll need access to more capital. Make sure the line of credit is flexible to grow with your business.Make sure the credit limit is high enough to cover your needs but not so high that you’ll be tempted to overspend. Consider the credit limit and how it will meet your needs.This may involve working with your current bank, reading online reviews and asking friends and colleagues for recommendations. Shop around and compare lender options to find a financial institution you trust and feel comfortable doing business with. Choose a lender you’re comfortable with.If you’re not comfortable pledging collateral for a loan, opt for an unsecured business line of credit for your startup. Secured lines of credit require collateral like real estate or other valuable business assets, while other financing does not. Choose a lender with interest rates and repayment terms that align with your budget and borrowing needs. Interest rates on lines of credit can vary widely but typically range from 10% to 80%, with the most competitive rates reserved for those with excellent credit. Read the fine print so you know exactly what you’re getting into and, where possible, choose a lender that does not charge extensive fees that drive up the cost of borrowing. Some lines of credit come with annual fees, origination fees and other hidden charges to help cover the lender’s administrative costs. Look for a credit line with no hidden fees.Here are a few tips to help you compare lines of credit and choose one that fits your needs: ![]() But with so many options out there, it can be tough to determine which line of credit is right for your business. A line of credit is one way to get that funding, and it can be a helpful tool for managing cash flow and covering unexpected expenses. When you’re running a startup, it’s necessary to access capital to fund day-to-day operations and grow the company. To learn more about how Forbes Advisor rates lenders, and our editorial process, check out our Loans Rating & Review Methodology. Where appropriate, we awarded partial points depending on how well a lender met each criterion. ![]() Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process-like online applications, prequalification options and mobile apps. We also looked at minimum credit score and time in business requirements and the geographic availability of the lender. Within each major category, we also considered several characteristics, including available loan amounts, repayment terms and applicable fees. We chose the best lenders based on the weighting assigned to each category: We reviewed 16 popular lenders based on 16 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process.
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