Business Lines of Credit


Sapphire Financials’ business lines of credit are well-suited for smaller, newly established businesses which are seeking an unsecured financing solution for additional cash flow. Business lines of credit allow you to explore business opportunities as and when they arise and also help in business expansion and covering expenses.

You might be wondering: what is the key difference between a regular business loan and a business line of credit? Why choose the latter? Well, there are a number of reasons why a business line of credit could be more beneficial for a small or new business as compared to other loan options. While both types of credit options can provide the necessary capital to small businesses, the business line of credit also offers flexibility in addition to capital.

There are various other reasons why small and newly setup businesses fare better by utilizing business lines of credit. They allow you to borrow to a specific limit, for example, $100,000 and interest needs to be paid only on the amount borrowed. A business can decide to withdraw money and make payments as and when possible. The only condition is that it shouldn’t exceed the credit limit. The same option is not available with a conventional business loan that offers a business lump sum amount of cash which is repaid over a pre-determined period of time (hence a preferred choice for long-term investments).

At a Glance

A business line of credit gives you capital to meet a whole variety of business needs. Draw on your business line of credit to get more working capital, buy inventory, handle seasonal cash flow gaps, pay off other debts, or address almost any other business emergency or opportunity.

Next Loan Type:

AmountMaximum Loan Amount

$10,000 to over $1 million

TermLoan Term

6 months to 5 years

RatesInterest Rates

8 to 27%


3 – 7 Days

How does it work?

A business line of credit is just a financing product which allows a business to draw money up to a certain fixed amount. The business needs to make payment of charges with respect to the outstanding balance. This process is quite similar to that of getting a credit card cash advance, just a little more complicated.

The good news is that business lines of credit offer a lot of flexibility to business owners and can be utilized for multiple things. A lot of small and young businesses make use of credit lines for paying operational expenses and suppliers. You can also make up for gaps in the cash flow with the help of credit lines. Hence they are quite popular among business owners.

Can I use a business line of credit?

You might be confused about whether or not a business line of credit is a suitable financing option for your business. Here’s what you need to know: If you are an entrepreneur who needs open-ended credit access for continuing business needs (e.g. inventory management, working capital etc.), a business line of credit could be the ideal approach towards cash flow management. Here are some ways in which you could benefit from a business line of credit:
Flexible revolving credit lines that start from $10,000.
Easy and quick access to funds whenever and however needed-online, on the phone, at a financial center etc.
Variable competitive rates based on the prime rate
Option to pay the entire amount at once or over a period of time
No need to pay interest till funds are drawn

At Sapphire Financials, we can guide you with regards to the best financing options, especially if you’re a younger company or a relatively small-sized business. Consider this example: If you opt for a business line of credit for a loan of up to $50,000, you could quality after only 6 months of starting the business and would not require huge credit lines. The business can opt for weekly or monthly payments over periods of six months, with interest rates ranging from 7 to 25 percent. In addition to this, you might get the loan approved and the funds offered within 24 hours! The terms and conditions for business lines of credit might vary slightly from one financial organization to another.

A business line of credit is usually considered as unsecured debt. This means that there is no need to offer collateral assets like real estate which could be sold off in case of default. This concept might appear to be the same as a business credit card, however it is costlier to get a cash advance in the case of a business credit card.

The difference between a regular business loan and a business line of credit was briefly touched upon earlier. Entrepreneurs and managers need to comprehend these differences prior to choosing a business line of credit or a small business loan. Let’s have a look at some of the vital differences in a bit more detail.

Better Access to Cash

As opposed to a regular business loan, a business line of credit allows a business to get funding even before the actual requirement arises. A lot of businesses, owing to the recurring nature of operations, might feel the need to borrow funds in order to manage the short-term needs of the company. A business line of credit allows you to enjoy access to funds at any time so that you can continue to run your business smoothly without any interruptions that might lead to heavy losses.


For most business loans, the payment method is fixed, there is a predetermined number of installments and a predetermined installment amount decided by the financial institution. This is possible since there is just a single amount lent to the business right at the start and interest rate is also fixed. Hence, installments will need to be paid either monthly, quarterly or yearly.
In the case of a business line of credit, there might be a variation in the minimum required payment amount every month. This is usually dependent on the amount which was withdrawn in the last 30 days. Loan agreements can vary and the interest might only be due. Alternatively, a bank might require the payment of interest along with fixed amount of the principal sum each month.

Term Period

There can be a range of different terms for business loans based on the loan amount, the business requirements and the collateral type. Typically, the term of a loan does not last over five years (might be longer if the type of collateral involved is real estate). This is why a business line of credit may be more suitable for a small business or a younger venture. The term of a loan in the case of a business line of credit might be up to 10 years. Conversely there could be an option available for the financial institutions to call lines dues every year.

Types of Business Lines of Credit

Taking advantage of an unsecured business line of credit can be the best option for business owners to have cash on demand. It is important to know that there are essentially two kinds of business lines of credit, namely traditional and non-traditional.

You need to assets which type of credit line is more suitable for your business and its unique requirements. Here’s a brief on both types of business lines of credit.

Traditional business lines of credit require detailed documentation so as to qualify. These include personal tax returns, financials, bank account information, business tax returns, business registration papers etc.

Besides the above-mentioned documentation work, once a traditional business line of credit is issued, there is a need for a yearly financial review for maintaining the credit line. There are various benefits of a traditional business line of credit including check-writing privileges.
Non-traditional business lines of credit include unsecured business credit cards.

Myths associated with business lines of credit

There are certain myths associated with business lines of credit and the biggest one is this: a bank offers the business a loan/line of credit, solely based on the business plan strength.

This myth obviously needs to be debunked. It is typically associated with a picture-perfect tale of a business owner boldly walking into a posh bank and using his/her powers of persuasion to convince the banker to lend them the money. This almost never happens. While you may require some detailed documentation when applying for a business line of credit, it is possible for even startup businesses to get this type of credit if they have been in business for a reasonable amount of time.

It is important for businesses to build ratings with various credit reporting agencies in the long run. When a business uses a business line of credit, it is able to establish a favorable payment history which eventually appears on the business credit report of the company. This allows the business to have greater opportunities to get credit in the future based on the creditworthiness of the company. Often business owners face the challenge of separating their personal and business expenditure. Here’s a benefit of opting for a business line of credit, it allows you to organize and keep a track of your businesses’ operational expenses because your line of credit is only committed to meet your business needs.

Enjoying access to a funding source is vital for the success of all businesses, big or small. However, not every financing option is suitable for your business. If you’re a small-sized business or a young company in the initial stages of setup, a business line of credit can offer you a lot of advantages over other financing options.


Business Line of Credit Advantages & Disadvantages

Lowest down payments

Only pay interest on funds drawn

Capital is available when needed

Suitable for a wide range of business purposes

Bad credit is acceptable

Excellent way to build your credit score

Might need to provide updated documents upon each draw

May require collateral

Higher rates for lower credit scores



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