Business Line of Credit: How It Works, When It is Useful

Need help managing cash flow? A business line of credit may be the right option for you. A business owner can borrow, as needed, up to the limit of the approved credit line, which can range from $10,000 to $1,000,000, depending on the type of business. Business lines of credit with lower credit limits are usually unsecured. This means collateral such as real estate or inventory is not required.

How Does a Line of Credit Work?

A line of credit works much like a credit card. You can draw funds as needed and repay over time, as long as you make payments on time and don’t exceed your credit limit. Once the line of credit has been funded, the funds are made available immediately and are easily accessible.

Why Would You Use a Line of Credit?

When a business is in a growth or expansion stage, it might be good timing to consider a line of credit. Businesses can use a line of credit for short-term operating capital. It is not recommended that it be used for long-term needs such as purchasing equipment, debt repayment or to purchase property. If a business is seeking less than a $10,000 line of credit, a business credit card might be a better option. Business credit cards can be utilized for travel expenses and purchasing, which may accrue points, rewards or cash back, depending on the spend category.

How to Qualify

For lines of credit under $50,000, OneAZ Credit Union advises that the business be in operations for at least two years. For lines of credit for more than $50,000, the business should be operational for at least three years. When applying for a business line of credit, the following may be required: personal and business tax returns, bank account statements and business financial statements, such as profit-and-loss statements and balance sheets, as well as a completed business loan application. Rates and fees are determined by the risk assigned to the request, but can be discussed in more detail by contacting a Business Banker at OneAZ today. QCBN

By Suzanne Gillies

Contact a OneAZ Business Banker for more details on the application process. Visit OneAZcu.com/Business to get started.

Suzanne Gillies is the business banker for Yavapai County.