Choosing the right line of credit for your business can be challenging for any business owner. Businesses often need access to funds to operate, and because cash flow gaps are not uncommon, many business owners find themselves without enough working capital.
You might need to purchase or upgrade expensive equipment, or you could be waiting on payments from several clients. Situations like these can have a serious impact on cash flow and even threaten the stability of your business. If you have a line of credit in place, however, you can handle these challenges with confidence, knowing you have access to the capital your business needs.
When choosing a business line of credit, it’s essential to gain a clear understanding of the financial implications for your business. To ensure your business gets the most value from the lender and line of credit product, there are a handful of factors you may want to consider.
Things to consider when shopping for a line of credit
Loan terms are a key consideration when looking for a line of credit. Some companies specialize in longer payback periods, while others require quick repayment. Do you prefer monthly or weekly payments? Do you want to repay over 12, 24, or 52 weeks?
Additionally, it’s important to think about the product experience and availability of customer support. In what ways will the lender provide support for your business? If you have a question about your line of credit, or if you need to resolve an issue, will you be helped in a timely manner?
In the past, a traditional bank was one of your only options for getting access to a line of credit. However, due to advances in financial technology, business owners now have many more when they’re looking for capital. With the help of algorithms, machine learning, and at-your-fingertips technology, online lenders can offer quicker and easier access to capital than traditional lenders — like banks and credit unions.
More lending options mean more choice, and when you choose a line of credit product like a Fundbox Line of Credit, you’ll have the option to upgrade to Fundbox Plus, which can provide many additional benefits to your business.
Every lender is different, and their differences extend from their application process to their fees, penalties, qualification requirements, and timeline. Before you finalize an application, it’s important to compare fees and interest rates to ensure you’re getting the best deal. It’s also important to know if simply applying for a loan will impact your credit score.
One such fee to consider is a draw fee, which you will incur each time you draw upon the line of credit. The draw fee varies based on the lender, but is usually between 1 and 2 percent of the amount withdrawn at the time. For example, if your line of credit has a draw fee of 2 percent and you draw $10,000, the draw fee would be $200.
Depending on your funding needs, financial health, and relationship with a lender, it might be in your best interest to opt for a premium tiered line of credit — like Fundbox Plus. For $99/month, Fundbox Plus offers 20 percent lower fees on new draws. So, if you’re planning to use your line of credit multiple times over the course of a year, it might make sense to consider a more premium line of credit option that offers lower fees and additional benefits.
More Time to Pay
A generous grace period before repayment begins can give your business finances a leg up. With Fundbox Plus, you get up to 28 days before your repayment begins.
This allows you to save what would otherwise be the initial payment, and you can use it to cover the cost of other timely, important expenses.
Consider longer terms with lower payments. By extending your repayment term to 52 weeks, you can benefit from lower weekly payment amounts, which can help you save money in the long run.
Longer repayment terms can offer you additional flexibility on how you make use of your line of credit. For example, rather than making small, sporadic draws to cover cash flow gaps, you might draw on your line of credit to invest in expensive equipment or other costly business growth initiatives — all at a lower weekly payment amount because you have extended terms.
Increase your working capital without sacrificing cash flow. Shifting from a weekly repayment schedule to a monthly* repayment option could help you free up cash flow for the rest of the month, enabling you to invest in more time-sensitive expenses like a marketing or advertising campaign for a seasonal sale.
*Payments made once every four weeks.
If you use your business line of credit regularly, it’s a good idea to consider overall product experience and how easily you can access the lender’s support team.
The quality of the customer support you receive can be critical to your happiness with your business line of credit. Whether you have a quick question or need more customized assistance, it’s valuable to be able to pick up the phone and get your question answered or problem resolved. Fundbox has invested in its customer support services, creating a highly skilled team that delivers a great experience both over the phone and via email. The support team even won the gold Stevie Award for outstanding customer support in the financial services category.
With Fundbox Plus, you have access to a dedicated support number and email address, so you’re sure to have your requests prioritized and managed by a highly trained representative.
Seventy-three percent of business owners admit to having felt lonely while running their company, with a third saying that they feel this way consistently, according to new research launched by Ultimate Finance.
Being a business owner can be exciting and satisfying, but it can also be isolating at times. It can be quite challenging for small business owners to find the community or support they need — especially on a tight budget.
Support from a like-minded community of business professionals is an invaluable aspect of running a successful business. With the exclusive benefits afforded by a top-tier line of credit product like Fundbox Plus, you gain access to custom-tailored events, exclusive discounts from our partners, and so much more.
Disclaimer: Fundbox and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Fundbox makes capital available to businesses through business loans and lines of credit made by First Electronic Bank, a Utah chartered Industrial Bank, member FDIC, in addition to invoice-clearing advances, business loans and lines of credit made directly by Fundbox.