A Line of Credit for your small business should not be something you dread.  In fact, it is easier to get than you might think.  If you have taken the proper steps to establish your business credit file you are golden, if you are trying to get a line of credit without having established your credit file, you will be denied.
Business Line of Credit is like having your own ATM

So what is a Business Line of Credit (LOC)?

When you think – Line of Credit – you are probably thinking you will get a credit card right?  Wrong.  Business Credit Cards are a  different animal altogether.  A Line of credit works similiarly in, you have a limit available for purchases and it is more in line with a loan.  You will have to payback what you borrow and also pay interest on that amount.  The interest , however,  will generally be less that the rate you will pay on a credit card.  So, the line of credit gives you a fixed amount you can use with a lower interest rate.   Here is the #1 difference between the LOC and a credit card:  you have access to CASH that you can use for anything that may arise in your business.  You can use it to cover payroll, buy invnetory or just pay off some bills.

Sure you can get a cash advance from your credit card but, you will pay fees for the advance and pay interest on that amount that had been advanced.  If you do not pay off that credit card at the end of the month then you will incur finance charges of the balance which adds more for you to pay back.  Every month that you let that card have a balance you will pay up to 30% interest on the balance.  

I know you are thinking that you have to pay interest on the LOC also, which is True. Over all, the interest will be more on the credit card because of the monthly recalculating of interest on the remaining balance.  The LOC charges you a much reduced interest rate for the amount borrowed.

Business Line of Credit is a Revolving Account!

Ok, so we have established the a Business LOC is more like a loan by the way it gives you access to physical cash and lower interest rates.  They are similar to Business Credit Cards too.  I know, it is confusing but, stick with me here.  The LOC is a  product that you can borrow from and have to repay.  If you have a Line of Credit that has a limit of $50,000, you can borrow any amount up to that limit. 

Once you pay back the amount borrowed, let’s say $10,000, you will once again have the intital $50,000 to borrow from.  

This is how it is like a credit card.  You borrow, pay back the amount with interest and then you can use it again and again.  As long as you keep your Line of credit in good standing you should never have a capital problem in your business.